Asymmetric information in secondary insurance markets: Evidence from the life settlements market

Daniel Bauer, Jochen Russ, Nan Zhu

Research output: Contribution to journalArticle

1 Scopus citations

Abstract

We use data from a large US life expectancy provider to test for asymmetric information in the secondary life insurance—or life settlements—market. We compare realized lifetimes for a subsample of settled policies relative to all (settled and nonsettled) policies, and find a positive settlement-survival correlation indicating the existence of informational asymmetry between policyholders and investors. Estimates of the “excess hazard” associated with settling show the effect is temporary and wears off over approximately 8 years. This indicates individuals in our sample possess private information with regards to their near-term survival prospects and make use of it, which has economic consequences for this market and beyond.

Original languageEnglish (US)
Pages (from-to)1143-1175
Number of pages33
JournalQuantitative Economics
Volume11
Issue number3
DOIs
StatePublished - Jul 1 2020

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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