Optimal rate classification for enhanced annuities |
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Authors: | Nadine Gatzert Gudrun Hoermann Hato Schmeiser |
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Institution: | 1.Lehrstuhl für Versicherungswirtschaft,Universit?t Erlangen-Nürnberg,Nürnberg,Germany;2.Munich,Germany;3.Institute of Insurance Economics,University of St. Gallen,St. Gallen,Switzerland |
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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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Keywords: | |
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