{"title":"Annuity selection in the presence of insurer default risk and government guarantees","authors":"Pamela Searle, Peter Ayton, Iain Clacher","doi":"10.1111/jori.12457","DOIUrl":null,"url":null,"abstract":"<p>We investigate whether individuals correctly assess the risk of default of annuity providers and incorporate this information into their decision-making when purchasing an annuity. To do so, we analyze actual retirement product choices from a large administrative data set from Chile and exploit an exogenous change that decreased the coverage of government guarantees against annuity provider default. If individuals are rational and properly incorporate default risk into their decision process then, before this change, individuals should choose riskier providers that give higher annuity payments. However, we find that individuals' decisions are not influenced by changes in their protection against the risk of provider default. It seems that individuals have been unnecessarily reducing their annuity payments by not incorporating crucial information about their actual risk exposure to default when selecting annuities at retirement.</p>","PeriodicalId":51440,"journal":{"name":"Journal of Risk and Insurance","volume":"91 1","pages":"161-192"},"PeriodicalIF":2.1000,"publicationDate":"2024-01-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://onlinelibrary.wiley.com/doi/epdf/10.1111/jori.12457","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Risk and Insurance","FirstCategoryId":"96","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1111/jori.12457","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
We investigate whether individuals correctly assess the risk of default of annuity providers and incorporate this information into their decision-making when purchasing an annuity. To do so, we analyze actual retirement product choices from a large administrative data set from Chile and exploit an exogenous change that decreased the coverage of government guarantees against annuity provider default. If individuals are rational and properly incorporate default risk into their decision process then, before this change, individuals should choose riskier providers that give higher annuity payments. However, we find that individuals' decisions are not influenced by changes in their protection against the risk of provider default. It seems that individuals have been unnecessarily reducing their annuity payments by not incorporating crucial information about their actual risk exposure to default when selecting annuities at retirement.
期刊介绍：
The Journal of Risk and Insurance (JRI) is the premier outlet for theoretical and empirical research on the topics of insurance economics and risk management. Research in the JRI informs practice, policy-making, and regulation in insurance markets as well as corporate and household risk management. JRI is the flagship journal for the American Risk and Insurance Association, and is currently indexed by the American Economic Association’s Economic Literature Index, RePEc, the Social Sciences Citation Index, and others. Issues of the Journal of Risk and Insurance, from volume one to volume 82 (2015), are available online through JSTOR . Recent issues of JRI are available through Wiley Online Library. In addition to the research areas of traditional strength for the JRI, the editorial team highlights below specific areas for special focus in the near term, due to their current relevance for the field.
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