Beyond Age and Sex: Enhancing Annuity Pricing

Joelle H. Fong

The Geneva Risk and Insurance Review, 2015, vol. 40, issue 2, 133-170

Abstract: This paper examines the use of more extensive risk classification and its impact on annuitisation values in consumer markets with mortality heterogeneity. Prices of U.S. retail annuities do not currently reflect buyers’ attributes other than age and sex. I qualitatively assess a number of proposed underwriting factors and show that the factors chosen can robustly predict mortality heterogeneity in a hazards framework. The relative value of annuities across demographic groups converges considerably under finer-grained pricing, but the change in consumers’ well-being is asymmetric. Shorter-lived annuitants gain about 30 per cent in financial and utility-adjusted terms, whereas longer-lived annuitants experience losses of 16 per cent.

Date: 2015
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.palgrave-journals.com/grir/journal/v40/n2/pdf/grir201412a.pdf Link to full text PDF (application/pdf)
http://www.palgrave-journals.com/grir/journal/v40/n2/full/grir201412a.html Link to full text HTML (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:genrir:v:40:y:2015:i:2:p:133-170

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/10713

Access Statistics for this article

The Geneva Risk and Insurance Review is currently edited by Michael Hoy and Nicolas Treich

More articles in The Geneva Risk and Insurance Review from Palgrave Macmillan, International Association for the Study of Insurance Economics (The Geneva Association) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().