The Demand for Enhanced Annuities

Arbeitspapier

In enhanced annuities, the annuity payment depends on one's state of health at some contracted date while in "standard annuities", it does not. The focus of this paper is on an annuity market where "standard" and enhanced annuities areoffered simultaneously. When all insured know equally well on their future health status either enhanced annuities drive standard annuities out of the market or vice versa. Both annuity types can exist simultaneously when the insured know varying exactly on their risk type. In the case of the existence of such an "interior" solution, its is derived that this solution must be unique in the case of risk averse insured and that it Pareto-dominates the corner solution. Finally, it is shown that in all cases where at least part of the insured buy enhanced annuities social welfare is reduced.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Discussion Paper ; No. 2008-15

Classification and Topics

• Classification: Management ; Household Saving; Personal Finance ; Allocative Efficiency; Cost-Benefit Analysis ; Portfolio Choice; Investment Decisions ; Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors
• Subject: annuitization ; health status ; enhanced annuities

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Schuhmacher, Petra
• Event: Veröffentlichung
• (who): Ludwig-Maximilians-Universität München, Fakultät für Betriebswirtschaft
• (where): München
• (when): 2008

Further information

• DOI: doi:10.5282/ubm/epub.7954
• Handle: http://hdl.handle.net/10419/104500
• URN: urn:nbn:de:bvb:19-epub-7954-0
• Last update: 10.03.2025, 11:46 AM CET