Living to 100 and Beyond: Implications of Longer Life Spans

Abstract

Life spans have increased remarkably in the last century. There is substantial disagreement and uncertainty among researchers today about the future course of mortality in the developed countries. Will we continue to live ever-longer lives, or is the human life span headed toward a biological upper limit? The answer to this question has important implications for the elderly, their spouses and children, businesses, and our society as a whole. Continued growth in life expectancy with good health would extend our ability to enjoy all the things we cherish.

Simultaneously, this growth would increase our need to prepare carefully for some unexpected challenges. Among these challenges is a greater need by individuals to save for retirement and to prepare for the possibility of becoming dependent upon family members and others for one’s care. Businesses will enjoy access to experienced workers and expanding markets among the elderly, while they also will try to control the post employment costs that longer life spans will generate. Finally, governments will struggle to manage competing interests as the financial needs of the elderly are weighed against other societal obligations.     

Impacts on Economic Security Programs of Rapidly Shifting Demographics

Abstract

This paper analyzes in some detail potential impacts on economic security programs—government, employer, and individual—that the aging of the baby boom generation may create. It begins by defining what is meant by “population aging” and concludes that fertility shifts are more important than improving life expectancy. It also argues that calling the baby boom the “postwar baby boom” is inaccurate and will lead to missed targets for product development and marketing. Finally, this section of the paper notes that the most rapidly growing segment of the population will be the oldest old—those age 85 and over, who will also put the greatest stress on the provision of health care and retirement income security.

The paper then looks at other demographic shifts of importance, in particular female labor force participation rates. The impact of shifting demographics is reviewed for each sponsor of economic security programs: the government (health care and social security); the employer (pension plans and group benefits); and the individual. Points of concern and offsetting opportunities for the insurance industry are noted. Finally, the paper looks at whether we will be able to “afford” the sudden retirement of the baby boom. The conclusion is that this will be affordable if we can convince a portion of the labor force to stay active longer, and if we have healthy productivity growth rates. The problems of an aging population can all be viewed as opportunities for those who have the map.     

From Participation To Repurchase: Low Income Households And Micro-insurance

The article asks what drives the time to repurchase for life and accident insurance contracts in low income households. We use data on customers of a financial services provider from three states in India and find that the probability of repurchase is highest in the first 2 months after the contract expires, and steadily declines after. This suggests a window of opportunity for financial firms and governments to target customers to ensure continuous insurance purchase. Nonmembership of microfinance groups and poor rainfall in the month of expiry affect the time to repurchase adversely. Customers who take longer to repurchase tend to increase the amount of insurance cover.     

Auswirkungen von Enhanced Annuities auf den Bestand eines Versicherers

The value for money of a standard annuity is the higher, the longer the life expectancy of an insured, and therefore it is only acceptable for persons with an above average life expectancy. The discrepancy is intensified by tax regulations that favor lifelong annuity payments opposed to a lump sum. This discrimination of impaired insureds could be prevented if so-called enhanced annuities were offered, i.e. products where the annuity paid is the larger, the lower the person’s life expectancy. The article presents a quantitative comparison of the risk profile of insurance companies offering standard annuity contracts compared to enhanced annuities and an analysis of the impact of adverse selection on a standard insurer. By definition of individual mortality rates a heterogeneous insurance portfolio is specified. Besides we model the individual underwriting of enhanced annuities. A Monte Carlo Simulation provides results to compare the profit/loss situation of a portfolio of traditional annuity products and a portfolio of enhanced annuities with individual underwriting of different quality and to assess the impact of selection effects.     

The shock of COVID-19 and the shock of rapid vaccine development on the value of senior life settlement contracts

In this paper, we develop a model that can capture how COVID-19 and the subsequent rapid vaccine development against COVID-19 impacts the value of pools of senior life settlements. The pandemic unexpectedly boosted the mortality rates of senior citizens who had prior diagnoses of certain health conditions. Our model accounts for the existence and concentration of these COVID-19 comorbidities in portfolios of senior life settlements. It is the concentration of assets linked to the mortality rates of a group who is at elevated risk to COVID-19 and who is also the primary beneficiaries of the COVID-19 vaccine that we examine. We illustrate how the shock of the pandemic increases the value of senior life settlements and how the accelerated development and distribution of COVID-19 vaccines moderated this increase. Our model is general enough to simulate the impact on other financial contracts that are linked to individual mortality rates. These would include life insurance contracts, annuities, and health insurance policies.     

Pooling and Separating Equilibria in Insurance Markets with Adverse Selection and Distribution Costs

In the Rothschild-Stiglitz [1976] model of a competitive insurance market with adverse selection, pooling equilibria cannot exist. However in practice, pooling contracts are frequent, notably in health insurance and life insurance. This is due to the fact that distribution costs are nonnegligible and increase rapidly when more contracts are offered. We modify accordingly the Rothschild-Stiglitz model by introducing such distribution costs. We find that, however small these costs may be, they entail possible existence of pooling equilibria. Moreover, in these pooling equilibria, it is the high-risk individuals who are rationed, in the sense that they would be willing to buy more insurance at the current premium/insurance ratio.     

Auswirkungen der steigenden Lebenserwartung auf die Gesundheitsausgaben

In the literature there are controversial discussions about the influence of the increasing live expectancy on the expenditure for health care. In the first part of this paper, I analyse the adaptability of the hypotheses of compression or extension of morbidity on the health care expenditure. On a theoretic basis, I transfer the hypotheses from the level of physical life quality to the level of monetary spending. I define a monetary version of the compression of morbidity hypothesis and of the expansion of morbidity hypothesis (the so called monetary medicalisation). In a further definition the influence of inflation is included. In the second part of the paper, I verify the hypotheses based on data from a large German private insurance company. The data include average health care expenditure per capita in the ambulant and stationary sectors for each age and gender. The availability of ten years of data allows the identification of a trend in the expenditure under increased life expectancy. As the spending shows a growth for each age and sex an ?inflation adjusted monetary medicalisation“ can be stated.     

Effects of Health and Longevity on Financial Risk Tolerance

We investigate the effects of health and life expectancy on tolerance of financial risk. Using a standard life-cycle model, we find that the effects of health and life expectancy on preferences over lifetime-income risk are theoretically ambiguous. However, risk tolerance is independent of health and life expectancy when utility takes one of the standard (harmonic absolute risk aversion) functional forms or when optimal consumption is constant over time. Our empirical results, using data from a stated-preference survey (n=2,795), suggest that financial risk tolerance is positively associated with both health and life expectancy; hence utility is not consistent with standard functional forms.     

Market Consistent Embedded Value in der privaten Krankenversicherung

The Market Consistent Embedded Value (MCEV) allows for a principal based valuation of insurance contract portfolios. An important aspect of the MCEV methodology is the possibility to compare different insurance companies. In this paper we introduce the valuation principles with respect to German private health insurance. To this end we first explain the different components of a MCEV. In the following we discuss the relevant aspects of market consistent valuation of German private health insurance and show, how financial options and guarantees of private health insurance contracts influence the shareholder value. In particular we analyze the impact of surplus distribution and the different surrender options of policyholders on the value.     

Versteilerung der alters- und geschlechtsspezifischen Ausgabenprofile von Krankenversicherern

It is well-known for a long time, that health care expenditure of elder people are a lot higher than expenditure of younger people, we call this correlation of average per-capita-expenditure and age expenditure profiles. If health care expenditures for the elderly grow faster than for younger people, the expenditure profiles become ?steeper“. Data of a German private health insurer are used to investigate the phenomenon growing steepness of profiles over a period of 18 years. In the article three instruments for measuring the phenomenon of growing steeper expenditure profiles are proposed. None of them is perfect, but the more or less common trend shows that the profiles of the investigated health insurance plans did grow steeper. The health plans of men do reflect this phenomenon clearer than those of women and the inpatient plans do show a stronger effect than the outpatient plans. Research of causes by data is not possible because of the given data structure. But neither the correlation between health expenditure and time til death nor the improving life expectancy can help to explain the phenomenon.     

城镇企业养老保险个人账户给付期测算研究——基于预期寿命的视角

养老保险个人账户给付期的科学设计是养老保险个人账户制度持续、稳定运行的关键.本文从预期寿命的角度构建了城镇企业职工养老保险个人账户给付期的测算模型,并从分性别和分地区预期寿命角度对养老保险个人账户给付期进行了测算,测算表明我国法定养老保险个人账户给付期设计与预期寿命变化不协调,并导致个人账户超支月数越来越大.可通过适当延长养老保险个人账户给付期、推迟退休年龄提高我国养老保险个人账户制度的运行效率.     

失业保险与公司财务杠杆

我国劳动力市场化程度日益加深导致劳动者职业转换愈加频繁,失业保险的作用日益突出。本文探究了失业保险金水平对企业财务杠杆的影响。运用2009—2019年上市公司数据进行实证分析,结果发现失业保险金上升会导致公司财务杠杆下降。渠道检验显示,提高失业保险金可以降低员工失业风险溢酬,公司劳动力成本下降,公司有更多自由现金流和盈利进行内源融资和偿还债务,公司财务杠杆下降。进一步分析发现,失业保险金的作用在失业率高的地区更加显著。主要结果在分别运用《社会保险法》和《关于调整失业保险金标准的指导意见》构造双重差分模型和工具变量解决内生性问题、更改模型设置、排除投资水平影响、删除特殊省份、更换样本期间后,依然成立。本文结果说明加大失业保险保障力度有助于降低企业财务风险。     

Die Gesundheitsausgaben in der letzten Lebensphase

The expenditures for healthcare in the last year of life fall with the age at death. According to this observation, the increase of the life expectancy should lead to a decrease of health expenditures. The available empirical data allows to verify this thesis. In the data, I find that the expenditures fall with the age at death at the same date. But, this does not lead to a decrease in healthcare expenditures as time goes by, because the declining effect of a growing live expectancy is much smaller than the increase of healthcare expenditures in every age at death.     

The Demand for Life Insurance in OECD Countries

This article examines the determinants of life insurance consumption in OECD countries. Consistent with previous results, we find a significant positive income elasticity of life insurance demand. Demand also increases with the number of dependents and level of education, and decreases with life expectancy and social security expenditure. The country's level of financial development and its insurance market's degree of competition appear to stimulate life insurance sales, whereas high inflation and real interest rates tend to decrease consumption. Overall, life insurance demand is better explained when the product market and socioeconomic factors are jointly considered. In addition, the use of GMM estimates helps reconcile our findings with previous puzzling results based on inconsistent OLS estimates given heteroscedasticity problems in the data.     

长寿风险的创新解决方案

长寿风险是指个人实际寿命高于预期寿命产生的财务风险.长寿风险给保险公司同时带来了新的挑战与机遇.近年来西方保险公司推出了各种应对长寿风险的创新解决方案,包括附保证变额年金、长期护理保险、反向抵押贷款和长寿风险证券化,对我国具有借鉴意义.本文从保险公司的新视角系统梳理了这四种创新方案,并对其优缺点和适用条件进行了比较分析...     

Social security, life insurance and annuities for families

In this paper we ask whether an aspect of social security, namely its role as a provider of insurance against uncertain life spans, is welfare enhancing. To this end we use an OLG model where agents have a bequest motive and differ in sex and marital status and where families are formed and destroyed and their characteristics evolve (exogenously) according to U.S. demographic patterns of marriage, divorce, fertility and mortality. We compare the implications of social security under a variety of market structures that differ in the extent to which life insurance and annuities are available. We find that social security is a bad idea. In economies where the private sector provides annuities and life insurance, it is a bad idea for the standard reason that it distorts the intertemporal margin by lowering the capital stock. In the absence of such securities social security is still a very bad idea, only marginally less so compared with economies with annuities and life insurance. We also explore these issues in a world where people live longer and we find no differences in our answers. As a by-product of our analysis we find that the existence of life insurance opportunities for people is important in welfare terms while that of annuities is not.     

The Health Insurance Reform Debate

This article provides an overview of the U.S. health care reform debate and legislation, with a focus on health insurance. Following a synopsis of the main problems that confront U.S. health care and insurance, it outlines the health care reform bills in the U.S. House and Senate as of early December 2009, including the key provisions for expanding and regulating health insurance, and projections of the proposals' costs, funding, and impact on the number of people with insurance. The article then discusses (1) the potential effects of the mandate that individuals have health insurance in conjunction with proposed premium subsidies and health insurance underwriting and rating restrictions, (2) the proposed creation of a public health insurance plan and/or nonprofit cooperatives, and (3) provisions that would modify permissible grounds for health policy rescission and repeal the limited antitrust exemption for health and medical liability insurance. It concludes by contrasting the reform bills with market-oriented proposals and with brief perspective on future developments.     

人口年龄结构、城乡居民基本养老保险对农村居民消费率的影响——基于2010-2017年中国省际面板数据的实证分析

利用世代交叠(OLG)模型和2010—2017年中国省际面板数据,实证分析人口年龄结构、城乡居民基本养老保险(简称“城乡居保”)对农村居民消费率的影响。研究发现:老年抚养比、预期寿命均与农村居民消费存在显著的负向关系,少儿抚养比与农村居民消费不存在显著性关系;城乡居保的缴费率、覆盖率与农村居民消费存在显著正向关系,但是城乡居保统一与农村居民消费不存在显著性关系,城乡居保缴费率与覆盖率对农村居民消费存在交互作用;农村居民的消费习惯较为平稳,农村居民收入增长会抑制农村居民消费支出。建议提高城乡居保待遇水平,巩固和完善缴费激励机制,明确政府财政补贴和个人缴费责任。     

The Cost of Firearm Deaths in the United States: Reduced Life Expectancies and Increased Insurance Costs

The United States remains far behind most other affluent countries in terms of life expectancy. One of the possible causes of this life expectancy gap is the widespread availability of firearms and the resulting high number of U.S. firearm fatalities: 10,801 homicides in 2000. The European Union experienced 1,260 homicides, Japan only 22. Using multiple decrement techniques, I show that firearm violence shortens the life of an average American by 104 days (151 days for white males, 362 days for black males). Among all fatal injuries, only motor vehicle accidents have a stronger effect. I estimate that the elimination of all firearm deaths in the United States would increase the male life expectancy more than the total eradication of all colon and prostate cancers. My results suggest that the insurance premium increases paid by Americans as a result of firearm violence are probably of the same order of magnitude as the total medical costs due to gunshots or the increased cost of administering the criminal justice system due to gun crime.     

Economic, Demographic, and Institutional Determinants of Life Insurance Consumption across Countries

Life insurance has become an increasingly important part ofthe financial sector over the past 40 years, providing a rangeof financial services for consumers and becoming a major sourceof investment in the capital market. But what drives the largevariation in life insurance consumption across countries remainsunclear. Using a panel with data aggregated at different frequenciesfor 68 economies in 1961–2000, this article finds thateconomic indicators—such as inflation, income per capita,and banking sector development—and religious and institutionalindicators are the most robust predictors of the use of lifeinsurance. Education, life expectancy, the young dependencyratio, and the size of the social security system appear tohave no robust association with life insurance consumption.The results highlight the importance of price stability andbanking sector development in fully realizing the savings andinvestment functions of life insurance in an economy.