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Optimum and Risk-Class Pricing of Annuities

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  • Eytan Sheshinski

Abstract

When information on longevity (survival functions) is unknown early in life, individuals have an interest to insure themselves against future ’risk-class’ classification. Accordingly, the First-Best typically involves transfers across states of nature. Competitive equilibrium cannot provide such transfers if insurance firms are unable to precommit their customers. On the other hand, public insurance plans that do not distinguish between ’risk-class’ realizations are also inefficient. It is impossible, a-priori, to rank these alternatives from a welfare point of view.

Suggested Citation

  • Eytan Sheshinski, 2003. "Optimum and Risk-Class Pricing of Annuities," CESifo Working Paper Series 873, CESifo.
    • Handle: RePEc:ces:ceswps:_873
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    File URL: https://www.cesifo.org/DocDL/cesifo_wp873.pdf
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    Cited by:

    1. Post, Thomas, 2009. "Individual welfare gains from deferred life-annuities under stochastic Lee-Carter mortality," SFB 649 Discussion Papers 2009-022, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    2. Wenan Fei & Claude Fluet & Harris Schlesinger, 2015. "Uncertain Bequest Needs and Long-Term Insurance Contracts," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 82(1), pages 125-148, March.
    3. Steinorth, Petra, 2012. "The demand for enhanced annuities," Journal of Public Economics, Elsevier, vol. 96(11), pages 973-980.
    4. Nan Zhu & Daniel Bauer, 2013. "Coherent Pricing of Life Settlements Under Asymmetric Information," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 80(3), pages 827-851, September.
    5. repec:hum:wpaper:sfb649dp2009-022 is not listed on IDEAS

    More about this item

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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