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Life Insurance

  • Villeneuve, Bertrand

This survey reviews the micro-economic foundations of the analysis of life insurance markets. The first part outlines a simple theory of insurance needs based on the life-cycle hypothesis. The second part builds on contract theory to expose the main issues in life insurance design within a unified framework. We investigate how much flexibility is desirable. Flexibility is needed to accommodate changing tastes and objectives, but it also gives way to opportunistic behaviors from the part of the insurers and the insured. Many typical features of actual life insurance contracts can be considered the equilibrium outcome of this trade-off.

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File URL: http://basepub.dauphine.fr/xmlui/bitstream/123456789/5369/1/life_insurance.PDF
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Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/5369.

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Date of creation: 2000
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Publication status: Published in Handbook of Insurance, . pp. 901-932.Length: 31 pages
Handle: RePEc:dau:papers:123456789/5369
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  1. James M. Poterba, 1997. "The History of Annuities in the United States," NBER Working Papers 6001, National Bureau of Economic Research, Inc.
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  9. Fitzgerald, John M, 1989. "The Taste for Bequests and Well-Being of Widows: A Model of Life Insurance Demand by Married Couples," The Review of Economics and Statistics, MIT Press, vol. 71(2), pages 206-14, May.
  10. Charles Mullin & Tomas Philipson, 1997. "The Future of Old-Age Longevity: Competitive Pricing of Morality Contingent Claims," University of Chicago - George G. Stigler Center for Study of Economy and State 134, Chicago - Center for Study of Economy and State.
  11. Benjamin M. Friedman & Mark Warshawsky, 1985. "The Cost of Annuities: Implications for Saving Behavior and Bequests," NBER Working Papers 1682, National Bureau of Economic Research, Inc.
  12. Fischer, Stanley, 1973. "A Life Cycle Model of Life Insurance Purchases," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(1), pages 132-52, February.
  13. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 488-500, August.
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  16. Pissarides, C A, 1980. "The Wealth-Age Relation with Life Insurance," Economica, London School of Economics and Political Science, vol. 47(188), pages 451-57, November.
  17. Eichenbaum, Martin S & Peled, Dan, 1987. "Capital Accumulation and Annuities in an Adverse Selection Economy," Journal of Political Economy, University of Chicago Press, vol. 95(2), pages 334-54, April.
  18. Davies, James B. & Kuhn, Peter, 1992. "Social security, longevity, and moral hazard," Journal of Public Economics, Elsevier, vol. 49(1), pages 91-106, October.
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  21. Deaton, Angus, 1992. "Understanding Consumption," OUP Catalogue, Oxford University Press, number 9780198288244, March.
  22. B. Douglas Bernheim, 1989. "How Strong are Bequest Motives? Evidence Based on Estimates of the Demand for Life Insurance and Annuities," NBER Working Papers 2942, National Bureau of Economic Research, Inc.
  23. Albert Ando & Luigi Guiso & Daniele Terlizzese, 1993. "Dissaving by the Elderly, Transfer Motives and Liquidity Constraints," NBER Working Papers 4569, National Bureau of Economic Research, Inc.
  24. Ehrlich, Isaac & Chuma, Hiroyuki, 1990. "A Model of the Demand for Longevity and the Value of Life Extension," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 761-82, August.
  25. Lewis, Frank D, 1989. "Dependents and the Demand for Life Insurance," American Economic Review, American Economic Association, vol. 79(3), pages 452-67, June.
  26. Arrondel, L. & Masson, A., 1994. "L'assurance vie et le motif de precaution dans les choix de patrimoniaux des menages," Papers 94-22, Laval - Laboratoire Econometrie.
  27. Brugiavini, Agar, 1993. "Uncertainty resolution and the timing of annuity purchases," Journal of Public Economics, Elsevier, vol. 50(1), pages 31-62, January.
  28. Cochrane, John H, 1995. "Time-Consistent Health Insurance," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 445-73, June.
  29. Levhari, David & Mirman, Leonard J, 1977. "Savings and Consumption with an Uncertain Horizon," Journal of Political Economy, University of Chicago Press, vol. 85(2), pages 265-81, April.
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