Searle, P., Ayton, P. and Clacher, I. (2023) Annuity selection in the presence of insurer default risk and government guarantees. Journal of Risk and Insurance. ISSN 0022-4367
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.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2024 The Authors. This is an open access article under the terms of the Creative Commons Attribution License (CC-BY-NC-ND 4.0). |
Keywords: | annuities, decumulation decision-making, default risk, information, retirement income |
Dates: |
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Institution: | The University of Leeds |
Academic Units: | The University of Leeds > Faculty of Business (Leeds) > Accounting & Finance Division (LUBS) (Leeds) |
Depositing User: | Symplectic Publications |
Date Deposited: | 28 Nov 2023 15:12 |
Last Modified: | 11 Jan 2024 16:34 |
Status: | Published online |
Publisher: | Wiley |
Identification Number: | 10.1111/jori.12457 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:205998 |