Cohort mortality risk or adverse selection in annuity markets?

Research output: Contribution to journalArticle (Academic Journal)peer-review

6 Citations (Scopus)
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We show that tests for adverse selection in annuity markets using prices are not identified. Within the UK annuity market, different annuity products create the potential for a Rothschild-Stiglitz separating equilibrium as different risk types could choose different annuities. Empirical analyses using the “money's worth” suggest that prices are indeed consistent with this explanation. However, we show that this pattern of annuity prices would also result from the actions of regulated annuity providers who must reserve against cohort mortality risk. Annuity products that might attract different consumer risk types also have different risks for the provider.
Original languageEnglish
Pages (from-to)68-81
Number of pages14
JournalJournal of Public Economics
Early online date5 Jul 2016
Publication statusPublished - Sept 2016

Structured keywords

  • AF Financial Markets


  • Adverse selection
  • Insurance markets
  • Annuities


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