IDEAS home Printed from https://ideas.repec.org/a/bpj/apjrin/v17y2023i2p143-178n1.html
   My bibliography  Save this article

The Impact of Product-Dependent Policyholder Risk Sensitivities in Life Insurance: Insights from Experiments and Model-Based Simulation Analyses

Author

Listed:
  • Gatzert Nadine
  • Hanika Moritz

    (School of Business, Economics and Society, Friedrich-Alexander-Universität Erlangen-Nürnberg (FAU), Lange Gasse 20, 90403, Nürnberg, Germany)

Abstract

In contrast to previous work, this paper studies the product-dependent risk sensitivities of policyholders toward the reported safety levels of a life insurer in a long-term multi-period setting. With this aim, we first conduct two choice-based conjoint analyses using a German survey panel to investigate the effect of an insurer’s reported default probability on individuals’ willingness to pay for annuities and term life insurances. Our experimental results suggest that individuals (sharply) reduce their willingness to pay for probabilistic life insurance products, with (strong) product-specific differences. In light of these observations, the paper then revisits the impact of these differing risk sensitivities on a life insurer’s risk situation in a simulation study based on an asset-liability model with a specific focus on a life insurer offering annuities and term life insurances. The results reveal the potentially strong impact of such product-dependent risk sensitivities on risk-reducing portfolio compositions. One main driver is the deviation between risk sensitivities depending on the respective product (annuities vs. term life).

Suggested Citation

  • Gatzert Nadine & Hanika Moritz, 2023. "The Impact of Product-Dependent Policyholder Risk Sensitivities in Life Insurance: Insights from Experiments and Model-Based Simulation Analyses," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 17(2), pages 143-178, July.
    • Handle: RePEc:bpj:apjrin:v:17:y:2023:i:2:p:143-178:n:1
    DOI: 10.1515/apjri-2022-0051
    as

    Download full text from publisher

    File URL: https://doi.org/10.1515/apjri-2022-0051
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.1515/apjri-2022-0051?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    life insurance; asset-liability model; risk-reducing portfolio; willingness to pay;
    All these keywords.

    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
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:apjrin:v:17:y:2023:i:2:p:143-178:n:1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.