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 language | English (US) |
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Pages (from-to) | 1143-1175 |
Number of pages | 33 |
Journal | Quantitative Economics |
Volume | 11 |
Issue number | 3 |
DOIs | |
State | Published - Jul 1 2020 |
All Science Journal Classification (ASJC) codes
- Economics and Econometrics