On the Demand Effects of Rate Regulation - Evidence from a Natural Experiment

Munich Risk and Insurance Center Working Paper No. 24

32 Pages Posted: 30 Jun 2015 Last revised: 19 Aug 2015

See all articles by Johannes Gerd Jaspersen

Johannes Gerd Jaspersen

Ludwig Maximilian University of Munich (LMU) - Faculty of Business Administration (Munich School of Management)

Andreas Richter

Ludwig Maximilian University of Munich (LMU) - Faculty of Business Administration (Munich School of Management)

Sebastian Soika

Ludwig Maximilian University of Munich (LMU) - Munich Risk and Insurance Center

Date Written: August 19, 2015

Abstract

We analyze the influence of rate regulation on insurance demand in an annuity setting. With a unique dataset containing a natural experiment due to German federal regulation and the E.U. Gender Directive we study the impact of unisex tariffs on contract choices in variable annuity products. Our data contains two different choice variables with antithetic predictions for men and women, meaning that women should increase their demand in one choice and decrease it in the other, while men should exhibit opposite behavior. We find with regard to both choices that both men and women have lower demand for guarantees within the annuity in unisex contracts than without rate regulation. This behavior contradicts economic intuition. We hypothesize that the effect could instead be explained by the public perception of unisex tariffs.

Keywords: Adverse selection, law and economics, rate regulation, unisex tariffs

JEL Classification: D14, D81, D82, G22, K20, L51

Suggested Citation

Jaspersen, Johannes Gerd and Richter, Andreas and Soika, Sebastian, On the Demand Effects of Rate Regulation - Evidence from a Natural Experiment (August 19, 2015). Munich Risk and Insurance Center Working Paper No. 24. Available at SSRN: https://ssrn.com/abstract=2624486 or http://dx.doi.org/10.2139/ssrn.2624486

Johannes Gerd Jaspersen

Ludwig Maximilian University of Munich (LMU) - Faculty of Business Administration (Munich School of Management) ( email )

Kaulbachstr. 45
Munich, DE 80539
Germany

Andreas Richter

Ludwig Maximilian University of Munich (LMU) - Faculty of Business Administration (Munich School of Management) ( email )

Schackstra├če 4
Munich, 80539
Germany

Sebastian Soika (Contact Author)

Ludwig Maximilian University of Munich (LMU) - Munich Risk and Insurance Center ( email )

Schackstra├če 4/III
Munich, 80539
Germany

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