Life insurance premiums display significant rigidity in the data, on average adjusting once every 3 years by more than 10%. This contrasts with the underlying marginal cost which exhibits considerable volatility due to the movements in interest and mortality rates. We build a dynamic model where...

This paper values equity-linked life insurance contracts with surrender guarantees for risk averse and loss averse policyholders in continuous time. With increasing risk aversion, policyholders surrender their insurances for higher values of the underlying equity fund, compared to an optimally...

There are large, upfront, fixed costs to writing a life insurance policy. Both agent commission and direct underwriting costs (e.g., fees for physicals and blood tests) are fully paid a few years into contracts that can last 10-30 years. Because of these upfront costs, insurers can actually lose...

We analyze how the life settlement market - the secondary market for life insurance - may affect consumer welfare in a dynamic equilibrium model of life insurance with one-sided commitment and overconfident policyholders. As in Daily et al. (2008) and Fang and Kung (2010), policyholders may...

What are the results of using life insurance products in retirement plans since the year 2000. Certain myths surrounding life insurance products are challenged in this paper. For example, a simple annuity had returns better then the S+ P 500 since 2000. Buying term and investing the difference...

We calculate reserves regarding expected policy holder behavior. The behavior is modeled to occur incidentally similarly to insurance risk. The focus is on multi-state modeling of insurance risk, e.g. in a disability model, and of behavioral risk, e.g. in a premium payment — free policy —...

The aim of this paper is to construct a dynamic programming algorithm for pricing variable annuities with GLWB under a stochastic mortality framework. Although our set-up is very general and only requires the Markovian property for the mortality intensity and the asset price processes, in the...

Actuarial fairness pertains to the situation in which the price of an insurance contract is equal to its expected outcome. This paradigm is at odds with financial pricing: If two financial contracts have the same expected value, but one is better than the other in the sense of second order...

Standard life annuities are attractive mainly for healthy people. Premium rates are consequently kept high. Hence, a large portion of potential annuitants are out of reach of insurers. In order to expand their business, some insurers have started offering better annuity rates to people whose...