Earticle

초록

영어

We analyze the effects of life insurance settlement on the insurer’s profit and the consumer and social welfares. We consider a one-period model in which the insurance market is monopolistic and the settlement market is competitive. Policyholders face heterogeneous liquidity risks in addition to mortality risks. Liquidity risks are introduced to address the case in which policyholders need urgent cash, leading them to surrender or settle the policies. It is assumed that the insurer cannot observe the liquidity risks nor discriminate policyholders based on the liquidity risks. It is further assumed that no costs are incurred in policy surrender or settlement. We find that the introduction of the life settlement market lowers the monopolistic rent while raising the premium. The effects on consumer welfare and social welfare are mixed. Consumer welfare increases only when the demand sufficiently increases. This finding implies that social welfare, as measured by the sum of consumer welfare and the insurer's profit, can increase if the increase in the consumer welfare is greater than the decrease in the insurer's profit. This finding is contrasted with the existing literature in which the settlement market lowers social welfare.

목차

Abstract
 I. Introduction
 II. Model description
 III. The basic model: with no settlement market
  1. Demand given target liquidity risk
  2. Surrender value and target liquidity risk
  3. Consumer welfare and social welfare
 IV. The model with a settlement market
  1. Demand given target liquidity risk
  2. Surrender value
  3. Target liquidity risk
  4. Consumer welfare and social welfare
 V. Effects of the life settlement market
 VI. Welfare comparison
 VII. Discussion
 VIII. Conclusion
 References
 Appendix

키워드

저자

• Jimin Hong [ Business School Seoul National University ]
• S. Hun Seog [ Business School Seoul National University ]

참고문헌

발행기관

간행물

표지보기 관심저널 등록

• 간행물명

  한국재무학회 학술대회

• 간기

  부정기

• 수록기간

  2006~2024

• 십진분류

  KDC 325 DDC 330