Saving Face: A Solution to the Hidden Crisis for Life Insurance Policyholders

29 Pages Posted: 9 Aug 2018

See all articles by Alexander Braun

Alexander Braun

University of St. Gallen - I.VW-HSG

Lauren Cohen

Harvard Business School; National Bureau of Economic Research (NBER)

Christopher J. Malloy

Harvard Business School; National Bureau of Economic Research (NBER)

Jiahua Xu

University of St. Gallen - I.VW-HSG; Harvard University - Harvard Graduate School of Arts and Sciences

Date Written: July 24, 2018

Abstract

The total face amount of terminated life insurance in the U.S. amounts to over two trillion dollars per annum. Little known is that, instead of allowing insurance carriers to pocket the premiums paid until termination and avoid the death claim, many policyholders may realize their policies’ value through resale to the secondary market, and receive a lump-sum markedly above the surrender value. We demonstrate how the inclusion of a mandated secondary sale provision in a policy contract will affect — and ultimately benefit — the welfare of policyholders without negatively affecting that of insurance companies.

JEL Classification: D52, D61, G22

Suggested Citation

Braun, Alexander and Cohen, Lauren and Malloy, Christopher J. and Xu, Jiahua, Saving Face: A Solution to the Hidden Crisis for Life Insurance Policyholders (July 24, 2018). Available at SSRN: https://ssrn.com/abstract=3179334 or http://dx.doi.org/10.2139/ssrn.3179334

Alexander Braun

University of St. Gallen - I.VW-HSG ( email )

Kirchlistrasse 2
St. Gallen, 9010
Switzerland

Lauren Cohen

Harvard Business School ( email )

Rock Center 321
Soldiers Field
Boston, MA 02163
United States

HOME PAGE: http://www.people.hbs.edu/lcohen

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Christopher J. Malloy

Harvard Business School ( email )

Soldiers Field Road
Baker Library 277
Boston, MA 02163
United States
617-495-4383 (Phone)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Jiahua Xu (Contact Author)

University of St. Gallen - I.VW-HSG ( email )

Tannenstrasse 19
St. Gallen, St. Gallen 9000
Switzerland

HOME PAGE: http://www.alexandria.unisg.ch/persons/6680

Harvard University - Harvard Graduate School of Arts and Sciences ( email )

Byerly Hall
8 Garden Street
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
65
Abstract Views
574
rank
340,694
PlumX Metrics