Working Paper: NBER ID: w9975
Authors: David McCarthy; Olivia S. Mitchell
Abstract: This paper evaluates the extent of adverse selection in life insurance and annuities in international markets, for both group and individual products. We also compare results with prior analyses of adverse selection in international annuity markets, focusing on the US, the UK, and Japan. Our results help assess the extent to which life insurers can hedge mortality exposure by writing both life insurance and annuities, and they may be used to determine a normal range for adverse selection in international insurance markets.
Keywords: No keywords provided
JEL Codes: G2; J1; J3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| adverse selection (D82) | improved mortality for annuity purchasers (G52) |
| adverse selection (D82) | worsened mortality for life insurance purchasers (G52) |
| adverse selection (D82) | reduced mortality for both life insurance and annuities (G52) |
| insurance company screening (G22) | mitigates risks associated with adverse selection (D82) |
| life insurance purchasers (G52) | higher mortality rates than non-purchasers (I12) |
| annuity purchasers (G52) | lower mortality than a control group (I12) |
| quantity of insurance purchased (G52) | less severe adverse selection effects (D82) |
| time after policy purchase (G52) | decline in impact of adverse selection (D82) |