Mandatory Unisex Policies And Annuity Pricing: Quasi-Experimental Evidence From Germany

Hans-Martin von Gaudecker and Carsten Weber
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Carsten Weber: Munich Center for the Economics of Aging (MEA), Postal: Amalienstr. 33, D-80799 Munich

No 6108, MEA discussion paper series from Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy

Abstract: We analyse the effect of abolishing gender-based categorisation of risks on the pricing of annuity contracts. Under the absence of screening activities, we find clear evidence of insurers expecting strong adverse selection effects. In particular, most of the unisex contracts’ payouts closely resemble those from women’s policies before the reform. Hence the policy target is not met and there are large efficiency losses for men. We conclude that there seems to be little hope for unisex policies to meet their equity ob jectives if consumers can react on the extensive margin, unless subsidies are extremely large.

Date: 2006-11-07
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Working Paper: Mandatory unisex policies and annuity pricing: quasi-experimental evidence from Germany (2006)
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