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Pensions, annuities, and long-term care insurance: on the impact of risk screening

M. Martin Boyer () and Franca Glenzer ()
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Franca Glenzer: HEC Montréal (Université de Montréal)

The Geneva Risk and Insurance Review, 2021, vol. 46, issue 2, No 3, 133-174

Abstract: Abstract We examine the interaction between an individual’s pension scheme and her purchase of long-term care insurance in a context where individuals learn their longevity risk type over time. We show that the structure of an individual’s retirement pension scheme is an important component of her selection of long-term care insurance coverage. When individuals purchase their retirement product and long-term care insurance after learning their risk type, low-risk individuals signal their type solely on the retirement product market, which allows all individuals, irrespective of their risk type, to perfectly insure against the incidence of long-term care shocks. When individuals purchase their retirement product before learning their risk type, then the retirement product will pool all risk types, which prevents any signaling in that market. If individuals still learn their type before purchasing long-term care insurance, then having to signal their type in the long-term care insurance market considerably reduces the take-up rate for such protection for all risk types.

Keywords: Asymmetric information; Information acquisition; Adverse selection; Longevity risk; Screening (search for similar items in EconPapers)
JEL-codes: D82 G22 H55 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1057/s10713-020-00058-9

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

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Handle: RePEc:pal:genrir:v:46:y:2021:i:2:d:10.1057_s10713-020-00058-9