Heterogeneity of Australian Population Mortality and Implications for a Viable Life Annuity Market
AbstractHeterogeneity in mortality rates is known to exist in populations, undermining the use of age and sex as the only rating factors for life insurance and annuity products. Life insurers underwrite life products using a variety of rating factors to allow for this heterogeneity. In the case of life annuities, there is limited underwriting used. Life insurers rely on an assumption that lives will self select and price the longevity risk with an annuity mortality table that assumes above average longevity.
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Bibliographic InfoPaper provided by ARC Centre of Excellence in Population Ageing Research (CEPAR), Australian School of Business, University of New South Wales in its series Working Papers with number 201103.
Length: 22 pages
Date of creation: Mar 2011
Date of revision:
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Longevity risk; mortality heterogeneity; frailty model; Markov ageing model; physiological age; annuity pricing;
Find related papers by JEL classification:
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
- J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
- C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions
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- Elbers, Chris & Ridder, Geert, 1982. "True and Spurious Duration Dependence: The Identifiability of the Proportional Hazard Model," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 49(3), pages 403-09, July.
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