Life insurance and life settlement markets with overconfident policyholders

doi:10.1016/j.jet.2020.105093

	Life insurance and life settlement markets with overconfident policyholders
	Fang, Hanming1,2,3 ; Wu, Zenan 4
	2020-09
发表期刊	JOURNAL OF ECONOMIC THEORY (IF:1.4[JCR-2023],1.7[5-Year])
ISSN	0022-0531
卷号	189
DOI	10.1016/j.jet.2020.105093
摘要	We analyze how the life settlement market-the secondary market for life insurance-may affect consumer welfare in a dynamic equilibrium model of life insurance with one-sided commitment and overconfident policyholders. In our model, policyholders may lapse their life insurance policies when they lose their bequest motives; however, they are overconfident in the sense that they may underestimate the probability of losing their bequest motives. We show that in the competitive equilibrium without life settlement, overconfident consumers will buy life insurance contracts with "too much" reclassification risk insurance for later periods. The life settlement market can impose a limit on the extent to which primary insurers can exploit overconfident consumers. We show that the life settlement market may increase the equilibrium consumer welfare of overconfident consumers when they are sufficiently "vulnerable" in the sense that they have a sufficiently large intertemporal elasticity of substitution of consumption. Our result is robust to alternative specifications where (i) insurers cannot observe the subjective or objective probability that policyholders will lose their bequest motives; (ii) insurers can include health-contingent cash surrender values (CSVs) in the life insurance contract; and (iii) policyholders underestimate their future mortality risk. (c) 2020 Elsevier Inc. All rights reserved.
关键词	Life insurance Secondary market Overconfidence Intertemporal elasticity of substitution
收录类别	SSCI
语种	英语
资助项目	National Science Foundation[SES-0844845] ; National Natural Science Foundation of China[71803003]
WOS研究方向	Business & Economics
WOS类目	Economics
WOS记录号	WOS:000570269500012
出版者	ACADEMIC PRESS INC ELSEVIER SCIENCE
引用统计	正在获取...
文献类型	期刊论文
条目标识符	https://kms.shanghaitech.edu.cn/handle/2MSLDSTB/123596
专题	创业与管理学院_PI研究组_方汉明组
通讯作者	Wu, Zenan
作者单位	1.Univ Penn, Dept Econ, 133 S 36th St, Philadelphia, PA 19104 USA; 2.ShanghaiTech Univ, Sch Entrepreneurship & Management, Shanghai, Peoples R China; 3.NBER, Cambridge, MA 02138 USA; 4.Peking Univ, Sch Econ, Beijing 100871, Peoples R China
第一作者单位	创业与管理学院
推荐引用方式 GB/T 7714	Fang, Hanming,Wu, Zenan. Life insurance and life settlement markets with overconfident policyholders[J]. JOURNAL OF ECONOMIC THEORY,2020,189.
APA	Fang, Hanming,&Wu, Zenan.(2020).Life insurance and life settlement markets with overconfident policyholders.JOURNAL OF ECONOMIC THEORY,189.
MLA	Fang, Hanming,et al."Life insurance and life settlement markets with overconfident policyholders".JOURNAL OF ECONOMIC THEORY 189(2020).