How Long Will You Live: Using Life Insurance Prices to Infer Market Expectations About Improvements in Lifespan
Abstract/Contents
- Abstract
- Life insurance markets are immensely popular in the United States, helping families to smooth consumption in the event of the death of a primary earner. Insurance firms price these products to reflect the life expectancy of the purchaser. However, life expectancies change over time and steadily lengthened throughout the twentieth century as a result of technological progress in fields like nutrition, sanitation, and healthcare. Given this upward trend in lifespan, I question whether expectations of future increases in life expectancy influence life insurance prices. I build off of research by Alpert, Bhattacharya, and Sood (2004) to construct a theoretical model for insurance prices that excludes any potential expectations effects. By comparing this model to actual life insurance prices from the 1994 Health and Retirement Study (HRS), I observe whether expectations of improvements in medical technology drive life insurance prices downward. After making this comparison, I find no overwhelming evidence that market expectations had a substantial effect on the prices of life insurance products held by HRS respondents.
Description
| Type of resource | text |
|---|---|
| Date created | June 2009 |
Creators/Contributors
| Author | Coonan, Jimmy | |
|---|---|---|
| Primary advisor | Bhattacharya, Jayanta | |
| Degree granting institution | Stanford University, Department of Economics |
Subjects
| Subject | Stanford Department of Economics |
|---|---|
| Subject | market expectation |
| Subject | life expectancy |
| Subject | Health and Retirement Study |
| Genre | Thesis |
Bibliographic information
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Preferred citation
- Preferred Citation
- Coonan, Jimmy. (2009). How Long Will You Live: Using Life Insurance Prices to Infer Market Expectations About Improvements in Lifespan. Stanford Digital Repository. Available at: https://purl.stanford.edu/ry434vw1520
Collection
Stanford University, Department of Economics, Honors Theses
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