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Erschienen in: Zeitschrift für die gesamte Versicherungswissenschaft 5/2010

01.02.2010 | Abhandlung

Optimal rate classification for enhanced annuities

verfasst von: Nadine Gatzert, Gudrun Hoermann, Hato Schmeiser

Erschienen in: Zeitschrift für die gesamte Versicherungswissenschaft | Ausgabe 5/2010

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Abstract

For a given premium, enhanced annuities pay higher pensions to policyholders with impaired health. Even though risk classification is a common concept in the insurance sector and should allow insurers to increase their profitability, enhanced annuities are rarely offered outside of the United Kingdom. The paper provides a general method of determining an optimal risk classification system for enhanced annuities that will maximize an insurance company’s profits. The cost of risk classification, as well as that incurred when insureds are assigned to inappropriate risk classes (a chief component of underwriting risk), are explicitly considered.

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Fußnoten
1
See LIMRA and Ernst and Young (2006, p. 10). Enhanced annuities, impaired life, and care annuities are all subsumed within what are known as “substandard annuities” (for a detailed description, see Gatzert et al. 2008). In the U.K. market, all types of substandard annuities are sometimes referred to as enhanced annuities.
 
2
See LIMRA and Ernst and Young (2006, p. 18).
 
3
For a detailed explanation, see Doherty (1981).
 
4
According to Actuarial Standard of Practice No. 12, a risk classification system is a “system used to assign risks to groups based upon the expected cost or benefit of the coverage or services provided” (Actuarial Standards Board 2005).
 
5
The model of mortality heterogeneity in the general population is based on Hoermann and Russ (2008).
 
6
See, e.g., Jones (1998, pp. 80–83), Pitacco (2004, p. 15), and Vaupel et al. (1979, p. 440).
 
7
See Gatzert et al. (2008).
 
8
See Cummins et al. (1983, pp. 83–92).
 
9
See, e.g., Pindyck and Rubinfeld (2008, pp. 393–403) and Baumol (1977, pp. 405–406).
 
10
For a formal description of this setting, see Gatzert et al. (2008).
 
11
See Doherty (1981).
 
12
See, e.g., Baumol (1977, pp. 416–417), assuming that the functions are differentiable.
 
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Metadaten
Titel
Optimal rate classification for enhanced annuities
verfasst von
Nadine Gatzert
Gudrun Hoermann
Hato Schmeiser
Publikationsdatum
01.02.2010
Verlag
Springer-Verlag
Erschienen in
Zeitschrift für die gesamte Versicherungswissenschaft / Ausgabe 5/2010
Print ISSN: 0044-2585
Elektronische ISSN: 1865-9748
DOI
https://doi.org/10.1007/s12297-009-0075-5

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