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Annuity Market (annuity + market)
Selected AbstractsOn the Cost of Adverse Selection in Individual Annuity Markets: Evidence From SingaporeJOURNAL OF RISK AND INSURANCE, Issue 2 2002Wai Mun Fong New evidence is presented on the cost of adverse selection in individual annuity markets using Singapore data. The Singapore annuity market is an interesting setting to examine the cost of adverse selection for three reasons. First, unlike many Western countries, the Singapore government provides very limited public financial assistance for retirees. Second, while social security contributions mandated under the Central Provident Fund (CPF) result in a high forced savings rate, a large proportion of CPF savings, are used up for housing. Third, to ensure that retirees have sufficient funds to meet basic needs, individuals who reach age 55 are required to set aside a minimum amount of their CPF savings, which can be withdrawn at age 62. The CPF Board allows various options for investing the minimum sum, but the most attractive option is to purchase an annuity. The institutional setting in Singapore in effect provides insurers with a large captive market for annuities. It is conjectured that this should be reflected in a significantly lower cost of adverse selection for annuities sold in Singapore as compared with other countries. The results herein, using data for CPF-approved insurers, are strongly consistent with this conjecture. On average, money's worth of annuities is higher than annuities sold to a similar age-gender mix in the United States, United Kingdom, and Australia. Adverse selection accounts for less than 13 percent of the cost of longevity insurance compared to 30,50 per- cent documented in many previous studies. These results suggest that one way to resolve the adverse selection problem is to adopt a universal individual defined contribution pension scheme that mandates or provides strong incentives for retirees to purchase annuities. [source] Refundable Annuities (Annuity Options)JOURNAL OF PUBLIC ECONOMIC THEORY, Issue 1 2010EYTAN SHESHINSKI Individuals can insure themselves perfectly against uncertainty about the length of life by purchasing deferred annuities early in life. In the absence of other uninsurable uncertainties (e.g., income), there will be no residual purchases or sales of annuities later in life, thereby avoiding any,adverse-selection. In contrast, the presence of such uncertainties creates an active residual annuity market based on the arrival of new information. We characterize the equilibrium in the residual annuity market and propose a new financial instrument,,refundable annuities,with a guaranteed refund price, which enables individuals who hold a portfolio of such annuities to better adjust their optimum consumption plan to different realizations. Refundable annuities are shown to be equivalent to,annuity options, that is, options that, if exercised, enable the purchase of annuities later in life at a predetermined price. Holding a variety of refundable annuities is (ex ante) welfare enhancing. [source] ENDOGENOUS HEALTH CARE, LIFE EXPECTANCY AND ECONOMIC GROWTHPACIFIC ECONOMIC REVIEW, Issue 1 2010Michael C. M. Leung We study the endogenous relationship between health care, life expectancy and output in a neoclassical growth model. Although health care directly diverts resources away from goods production, it prolongs life expectancy, which in turn leads to higher savings and, hence, capital formation through a private annuity market. We show that savings and health care are complements in equilibrium, with both rising with economic development. Our model is therefore consistent with several observed stylized development patterns across countries. Moreover, through the longevity-enhancing channel, health care and health production technology are found by simulation to be growth and welfare promoting. [source] SELECTION EFFECTS IN THE UNITED KINGDOM INDIVIDUAL ANNUITIES MARKETTHE ECONOMIC JOURNAL, Issue 476 2002Amy Finkelstein This paper explores adverse selection in the voluntary and compulsory individual annuity markets in the United Kingdom. Two empirical regularities support standard models of adverse selection. First, annuitants are longer-lived than non-annuitants. These mortality differences are more pronounced in the voluntary than in the compulsory annuity market. We estimate that the amount of adverse selection in the compulsory market is about one half of that in the voluntary market. Second, the pricing of different types of annuity products within each annuity market is consistent with individuals selecting products based, in part, on private information about their mortality prospects. [source] On the Cost of Adverse Selection in Individual Annuity Markets: Evidence From SingaporeJOURNAL OF RISK AND INSURANCE, Issue 2 2002Wai Mun Fong New evidence is presented on the cost of adverse selection in individual annuity markets using Singapore data. The Singapore annuity market is an interesting setting to examine the cost of adverse selection for three reasons. First, unlike many Western countries, the Singapore government provides very limited public financial assistance for retirees. Second, while social security contributions mandated under the Central Provident Fund (CPF) result in a high forced savings rate, a large proportion of CPF savings, are used up for housing. Third, to ensure that retirees have sufficient funds to meet basic needs, individuals who reach age 55 are required to set aside a minimum amount of their CPF savings, which can be withdrawn at age 62. The CPF Board allows various options for investing the minimum sum, but the most attractive option is to purchase an annuity. The institutional setting in Singapore in effect provides insurers with a large captive market for annuities. It is conjectured that this should be reflected in a significantly lower cost of adverse selection for annuities sold in Singapore as compared with other countries. The results herein, using data for CPF-approved insurers, are strongly consistent with this conjecture. On average, money's worth of annuities is higher than annuities sold to a similar age-gender mix in the United States, United Kingdom, and Australia. Adverse selection accounts for less than 13 percent of the cost of longevity insurance compared to 30,50 per- cent documented in many previous studies. These results suggest that one way to resolve the adverse selection problem is to adopt a universal individual defined contribution pension scheme that mandates or provides strong incentives for retirees to purchase annuities. [source] SELECTION EFFECTS IN THE UNITED KINGDOM INDIVIDUAL ANNUITIES MARKETTHE ECONOMIC JOURNAL, Issue 476 2002Amy Finkelstein This paper explores adverse selection in the voluntary and compulsory individual annuity markets in the United Kingdom. Two empirical regularities support standard models of adverse selection. First, annuitants are longer-lived than non-annuitants. These mortality differences are more pronounced in the voluntary than in the compulsory annuity market. We estimate that the amount of adverse selection in the compulsory market is about one half of that in the voluntary market. Second, the pricing of different types of annuity products within each annuity market is consistent with individuals selecting products based, in part, on private information about their mortality prospects. [source] | ||||||||||