Multiple reference points and the demand for principal-protected life annuities : an experimental analysis

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MAP20160008630

Knoller, Christian

Multiple reference points and the demand for principal-protected life annuities : an experimental analysis / Christian Knoller

Sumario: We conducted an experiment in which participants were confronted with an experimental annuitization decision. Previous research has argued in favor of the hypothesis that a combination of mental accounting and prospect theory can explain why annuities containing a capital guarantee are preferred to standard annuities. However, from this perspective people wouldnot annuitize their assets at all, but rather invest themoney in a risk-free alternative. Recent research has also suggested a cushion effect. When all possible outcomes of two options are above a certain goal, this goal serves as a cushion in case of unfavorable outcomes. Hence, individuals might have a higher propensity to exhibit risk-seeking behavior. We find that individuals were indeed more willing to choose the annuity option if it contained a capital guarantee and that individuals using this guarantee as a cushion were even more willing to choose the annuity. Thus, the cushion effect can partially explain the high demand for guarantee features in annuity contracts.

En: The Journal of risk and insurance. - Nueva York : The American Risk and Insurance Association, 1964- = ISSN 0022-4367. - 01/03/2016 Volumen 82 Número 5 - marzo 2016 , p. 163-179

1. Renta vitalicia . 2. Mercado de seguros . 3. Productos de seguros . 4. Pensiones . 5. Seguro de vida . I. Título.