Dynamic hybrid products in life insurance: Assessing the policyholders’ viewpoint
Journal
Insurance: Mathematics and Economics
ISSN
0167-6687
Type
journal article
Date Issued
2014
Author(s)
Abstract (De)
Dynamic hybrid life insurance products are intended to meet new consumer needs regarding stability
in terms of guarantees as well as sufficient upside potential. In contrast to traditional participating or
classical unit-linked life insurance products, the guarantee offered to the policyholders is achieved by a
periodical rebalancing process between three funds: the policy reserves (i.e. the premium reserve stock,
thus causing interaction effects with traditional participating life insurance contracts), a guarantee fund,
and an equity fund. In this paper, we consider an insurer offering both, dynamic hybrid and traditional
participating life insurance contracts and focus on the policyholders’ perspective. The results show that
higher guarantees do not necessarily imply a higher willingness-to-pay, but that in case of dynamic hybrid
contracts, a minimum guarantee level should be offered in order to ensure that the willingness-to-pay
exceeds the minimum premium the insurer has to charge when selling the contract. In addition, strong
interaction effects can be found between the two products, which particularly impact the willingness-topay
of the dynamic hybrids.
in terms of guarantees as well as sufficient upside potential. In contrast to traditional participating or
classical unit-linked life insurance products, the guarantee offered to the policyholders is achieved by a
periodical rebalancing process between three funds: the policy reserves (i.e. the premium reserve stock,
thus causing interaction effects with traditional participating life insurance contracts), a guarantee fund,
and an equity fund. In this paper, we consider an insurer offering both, dynamic hybrid and traditional
participating life insurance contracts and focus on the policyholders’ perspective. The results show that
higher guarantees do not necessarily imply a higher willingness-to-pay, but that in case of dynamic hybrid
contracts, a minimum guarantee level should be offered in order to ensure that the willingness-to-pay
exceeds the minimum premium the insurer has to charge when selling the contract. In addition, strong
interaction effects can be found between the two products, which particularly impact the willingness-topay
of the dynamic hybrids.
Language
English
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
North Holland Publ. Co.
Volume
59
Start page
87
End page
99
Pages
13
Subject(s)
Division(s)
Eprints ID
255490