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Enhanced Annuities: Drivers of and Barriers to Supply and Demand

Author

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  • Nadine Gatzert

    (Department of Insurance Economics and Risk Management, Friedrich-Alexander University Erlangen-Nürnberg (FAU), Lange Gasse 20, 90403 Nürnberg, Germany. E-mails: nadine.gatzert@fau.de; udo.klotzki@fau.de)

  • Udo Klotzki

    (Department of Insurance Economics and Risk Management, Friedrich-Alexander University Erlangen-Nürnberg (FAU), Lange Gasse 20, 90403 Nürnberg, Germany. E-mails: nadine.gatzert@fau.de; udo.klotzki@fau.de)

Abstract

Enhanced annuities pay higher pensions than standard annuities in case of a reduced life expectancy and are very prominent in the U.K. insurance market but not in other markets. The aim of this paper is to study drivers of and barriers to supply and demand of enhanced annuities as well as potential market implications of their introduction, including implications for the standard immediate and deferred annuity markets, annuitisation rates and the so-called cannibalisation effect, which may arise within the portfolio of standard annuities because of the enhanced annuity offering. The analysis is based on a comprehensive literature review and an empirical survey in the German life insurance market, which is also intended to offer insight for other industrialised countries with a similar situation in regard to the demographic development and an increasing need for private pensions.

Suggested Citation

  • Nadine Gatzert & Udo Klotzki, 2016. "Enhanced Annuities: Drivers of and Barriers to Supply and Demand," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 41(1), pages 53-77, January.
    • Handle: RePEc:pal:gpprii:v:41:y:2016:i:1:p:53-77
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    Citations

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    Cited by:

    1. Maria Alexandrova & Nadine Gatzert, 2019. "What Do We Know About Annuitization Decisions?," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 22(1), pages 57-100, March.
    2. Ermanno Pitacco & Daniela Y. Tabakova, 2022. "Special-Rate Life Annuities: Analysis of Portfolio Risk Profiles," Risks, MDPI, vol. 10(3), pages 1-22, March.
    3. Luca Anzilli & Silvio Giove, 2020. "Multi-criteria and medical diagnosis for application to health insurance systems: a general approach through non-additive measures," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 43(2), pages 559-582, December.

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