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Heterogeneity of Australian Population Mortality and Implications for a Viable Life Annuity Market

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Author Info

  • Shu Su

    ()
    (Australian School of Business, University of New South Wales)

  • Michael Sherris

    ()
    (School of Risk and Actuarial Studies and ARC Centre of Excellence in Population Ageing Research, Australian School of Business, University of New South Wales)

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    Abstract

    Heterogeneity 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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    File URL: http://cepar.edu.au/media/48691/Heterogeneity%20of%20Australian%20Population%20Mortality.pdf
    File Function: First version, 2011
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    Bibliographic Info

    Paper 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.

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    Length: 22 pages
    Date of creation: Mar 2011
    Date of revision:
    Handle: RePEc:asb:wpaper:201103

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    Related research

    Keywords: Longevity risk; mortality heterogeneity; frailty model; Markov ageing model; physiological age; annuity pricing;

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    1. 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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