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).
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15761.
Date of creation: Feb 2010
Date of revision:
Note: IO PE
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
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)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- 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.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.