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Transparency and Adverse Selection: Evidence from an Electronic Platform for Annuities

Author

Listed:
  • Eduardo Fajnzylber

    (Universidad Adolfo Ibáñez)

  • Maria F. Gabrielli

    (Universidad del Desarrollo)

  • Manuel Willington

    (Universidad del Desarrollo)

Abstract

In this letter we show robust evidence that the introduction of an electronic platform in the Chilean annuity market in 2004 exacerbated adverse selection. Male and femaleannuitants who retired after 2004 live around two years longer than non-annuitants, while before the difference was smaller or non statistically significant. Post 2004, thefraction of annuitants decreased despite the fact that the deals offered by insurance companies improved. These facts are consistent with the electronic platform bringingtransparency, competition, and reducing the scope for sales agents to affect retirees’ choices.

Suggested Citation

  • Eduardo Fajnzylber & Maria F. Gabrielli & Manuel Willington, 2022. "Transparency and Adverse Selection: Evidence from an Electronic Platform for Annuities," Working Papers 168, Red Nacional de Investigadores en Economía (RedNIE).
    • Handle: RePEc:aoz:wpaper:168
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    File URL: https://rednie.eco.unc.edu.ar/files/DT/168.pdf
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    References listed on IDEAS

    as
    1. Benjamin R. Handel & Jonathan T. Kolstad & Johannes Spinnewijn, 2019. "Information Frictions and Adverse Selection: Policy Interventions in Health Insurance Markets," The Review of Economics and Statistics, MIT Press, vol. 101(2), pages 326-340, May.
    2. Amy Finkelstein & James Poterba, 2004. "Adverse Selection in Insurance Markets: Policyholder Evidence from the U.K. Annuity Market," Journal of Political Economy, University of Chicago Press, vol. 112(1), pages 183-208, February.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Adverse selection; annuities; market transparency; Chilean pension system;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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