Centro de Documentacion de Fundación MAPFRE - Guaranteed renewable life insurance under demand uncertainty

MAP20210005664

Guaranteed renewable life insurance under demand uncertainty / Michael Hoy, Afrasiab Mirza, Asha Sadanand

Sumario: Guaranteed renewability (GR) is a prominent feature in many health and life insurance markets. We develop a model that includes unpredictable (and unobservable) fluctuations in demand for life insurance as well as changes in risk type (observable) over individuals' lifetimes. The presence of demand type heterogeneity leads to the possibility that optimal GR contracts may have a renewal price that is either above or below the actuarially fair price of the lowest risk type in the population. Individuals whose type turns out to be high risk but low demand renew more of their GR insurance than is efficient due to the attractive renewal price. This results in imperfect insurance against reclassification risk. Although a first-best efficient contract is not possible in the presence of demand type heterogeneity, the presence of GR contracts nonetheless improves welfare relative to an environment with only spot markets

En: The Journal of risk and insurance. - Nueva York : The American Risk and Insurance Association, 1964- = ISSN 0022-4367. - 01/03/2021 Volumen 88 Número 1 - marzo 2021 , p. 131-159

1. Seguro de vida . 2. Seguro de salud . 3. Mercado de seguros . 4. Garantías . I. Mirza, Afrasiab . II. Sadanand, Asha . III. Título.