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Title: Annuity and insurance choice under habit formation
Authors: Boyle, Phelim
Tan, Ken Seng
Wei, Pengyu
Zhuang, Sheng Chao
Keywords: Business::Finance
Issue Date: 2022
Source: Boyle, P., Tan, K. S., Wei, P. & Zhuang, S. C. (2022). Annuity and insurance choice under habit formation. Insurance: Mathematics and Economics, 105, 211-237.
Journal: Insurance: Mathematics and Economics
Abstract: This paper examines the impact of habit formation on the demand for life-contingent contracts in a life-cycle model. We derive an analytical solution for the optimal consumption, portfolio choice, and life insurance/annuity purchases. We illustrate the mechanism by which the consumption habit assumption can alter the bequest motive and therefore drive the demand for life-contingent products. Based on our assumed insurance/annuity markets, we show that habit formation alone leads to low demand on either life insurance or annuity but not both. However, habit formation together with social security results in low demand in both life insurance and annuity.
ISSN: 0167-6687
DOI: 10.1016/j.insmatheco.2022.04.003
Schools: Nanyang Business School 
Research Centres: Insurance Risk & Finance Research Centre
Rights: © 2022 Elsevier B.V. All rights reserved. This paper was published in Insurance: Mathematics and Economics and is made available with permission of Elsevier B.V.
Fulltext Permission: embargo_20240807
Fulltext Availability: With Fulltext
Appears in Collections:NBS Journal Articles

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