Life insurance settlement and the monopolistic insurance market
- Authors
- Hong, Jimin; Seog, S. Hun
- Issue Date
- Jul-2018
- Publisher
- ELSEVIER SCIENCE BV
- Keywords
- Life insurance; Settlement; Surrender; Welfare; Monopolistic insurance market; Competitive insurance market
- Citation
- INSURANCE MATHEMATICS & ECONOMICS, v.81, pp.36 - 50
- Journal Title
- INSURANCE MATHEMATICS & ECONOMICS
- Volume
- 81
- Start Page
- 36
- End Page
- 50
- URI
- http://scholarworks.bwise.kr/ssu/handle/2018.sw.ssu/39975
- DOI
- 10.1016/j.insmatheco.2017.12.003
- ISSN
- 0167-6687
- Abstract
- We analyze the effects of life insurance settlement on insurance contract design, the insurer's profit and welfare. Policyholders face not only mortality risks but also heterogeneous liquidity risks which lead the policyholders to surrender or settle the policies. It is assumed that the insurer cannot discriminate policyholders based on liquidity risks, and that no cost is incurred in surrender and settlement. We characterize the conditions for the endogenous existence of a settlement market, and find that the settlement market, if it exists, raises insurance premium. The effects of settlement on profit and welfare depend on the market structure. In the monopolistic insurance market, the settlement market lowers the insurer's profit, and consumer welfare increases whenever demand increases and possibly increases even when demand decreases. This finding is in contrast with most of the existing studies reporting that settlement never has a positive effect on welfare. In the competitive insurance market, welfare always decreases. (C) 2018 Elsevier B.V. All rights reserved.
- Files in This Item
- There are no files associated with this item.
- Appears in
Collections - College of Natural Sciences > ETC > 1. Journal Articles
![qrcode](https://api.qrserver.com/v1/create-qr-code/?size=55x55&data=https://scholarworks.bwise.kr/ssu/handle/2018.sw.ssu/39975)
Items in ScholarWorks are protected by copyright, with all rights reserved, unless otherwise indicated.