Investment guarantees in unit-linked life insurance from the customer perspective

Gatzert, Nadine; Huber, Carin; Schmeiser, Hato

doi:10.1007/s12297-010-0126-y

Cited by 3 publications

(1 citation statement)

References 36 publications

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“…Another recent development that might affect future lapse rates is the secondary market for life insurance. Gatzert et al (2010) describe the impact of speculation against insurers by the emerging secondary market. Finally, policyholders are likely to become more and better informed due to an increasing number of independent agents and the availability of detailed product information and comparisons enabled by the internet.…”

Section: Areas For Future Researchmentioning

confidence: 99%

Research on lapse in life insurance: what has been done and what needs to be done?

Eling

Kochanski

2013

The Journal of Risk Finance

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Access to this document was granted through an Emerald subscription provided by emerald-srm: 409465 [] For AuthorsIf you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. AbstractPurpose -The purpose of this paper is to review research on lapse in life insurance and to outline potential new areas of research in this field. Design/methodology/approach -The authors consider theoretical lapse rate models as well as empirical research on life insurance lapse and provide a classification of these two streams of research. More than 50 theoretical and empirical papers from this important field of research are reviewed. Challenges for lapse rate modeling, lapse risk mitigation techniques, and possible trends in future lapse behavior are discussed. Findings -Lapse rate modeling has been a very active field of research in the last years, as evidenced by the 44 papers on lapse modeling considered in this review. Moreover, a fair amount of empirical work (another 12 papers) has been done, especially on the issue of how environmental variables affect lapse. Research on individual policyholder and contract information is more scarce, since such information is typically treated as confidential. Practical implications -The risks arising from lapse are of high economic importance. Lapsation is thus of interest not only to academics, but is highly relevant for the industry, regulators, and policymakers, especially in regard to designing an appropriate regulatory environment. Lapsation also impacts many actuarial tasks, such as product design, pricing, hedging, and risk management. A review of the recent literature might be helpful for these tasks. Originality/value -To the best of the authors' knowledge, this is the first structured review of the increasingly important literature on life insurance lapsation. Next to the structured review of the existing models and the empirical evidence, the paper also contributes to the literature by discussing challenges for lapse rate modeling and possible trends.

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Section: Areas For Future Researchmentioning

confidence: 99%

Research on lapse in life insurance: what has been done and what needs to be done?

Eling

Kochanski

2013

The Journal of Risk Finance

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Investment guarantees in unit-linked life insurance from the customer perspective

2010

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Interest rate guarantees are a typical contract feature in unit-linked-life insurance products. As the financial crisis of 2007/2008 has shown, these guarantees can be of substantial value for policyholders since they ensure that at least a minimum amount will be paid back even if the mutual fund value falls below a specific guaranteed level. However, from the insurance company's view, these guarantees can be costly-especially in highly volatile markets-due to the required risk management measures which must be undertaken to secure the guarantees promised to the customers. Thus, the aim of this paper is to investigate whether customers really value these guarantees and if their willingness to pay (WTP) is sufficient to cover the guarantee costs. To elicit customer WTP, we use an online questionnaire and compare these results to the actual guarantee costs calculated with the Black and Scholes option pricing formula. One main finding is that even though most of the participants in the online questionnaire work in the financial industry, subjective prices are difficult to derive and are lower, on average, than the prices obtained using a financial pricing model. However, many participants are still willing to pay a substantially higher price.

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Towards a common standard – A reporting checklist for web-based stated preference valuation surveys and a critique for mode surveys

Menegaki

Olsen

Tsagarakis

2016

Journal of Choice Modelling

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Investment guarantees in unit-linked life insurance from the customer perspective

Cited by 3 publications

References 36 publications

Research on lapse in life insurance: what has been done and what needs to be done?

Research on lapse in life insurance: what has been done and what needs to be done?

Investment guarantees in unit-linked life insurance from the customer perspective

Towards a common standard – A reporting checklist for web-based stated preference valuation surveys and a critique for mode surveys

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