How Does Life Settlement Affect the Primary Life Insurance Market?
AbstractWe study the effect of the life settlement market on the structure of long term contracts offered by the primary market for life insurance, as well as the effect on consumer welfare, using a dynamic model of life insurance with one sided commitment and bequest-driven lapsation. We show that the presence of life settlement affects the extent as well as the form of dynamic reclassification risk insurance in the equilibrium of the primary insurance market, and that the settlement market generally leads to lower consumer welfare. We also examine the primary insurers' response to the settlement market when they can offer enriched contracts by specifying optimally chosen cash surrender values (CSVs).
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15761.
Date of creation: Feb 2010
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Other versions of this item:
- Hanming Fang & Edward Kung, 2010. "How Does Life Settlement Affect the Primary Life Insurance Market?," PIER Working Paper Archive 10-006, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-03-06 (All new papers)
- NEP-IAS-2010-03-06 (Insurance Economics)
- NEP-RMG-2010-03-06 (Risk Management)
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- Yoshizawa, Takuya, 2014. "Characteristics of insurance contracts suitable to benefit value insurance settlements," 商学討究 (Shogaku Tokyu), Otaru University of Commerce, vol. 64(4), pages 235-255.
- Daniel Gottlieb & Kent Smetters, 2012. "Narrow Framing and Life Insurance," NBER Working Papers 18601, National Bureau of Economic Research, Inc.
- Pashchenko, Svetlana & Porapakkarm, Ponpoje, 2011.
"Welfare costs of reclassification risk in the health insurance market,"
34189, University Library of Munich, Germany.
- Pashchenko, Svetlana & Porapakkarm, Ponpoje, 2011. "Welfare costs of reclassification risk in the health insurance market," Working Paper Series, Center for Fiscal Studies 2011:13, Uppsala University, Department of Economics.
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