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Current Developments in Financial Services Regulation and Consumer Preferences for Term Life Insurance
Type
fundamental research project
Start Date
01 February 2016
End Date
31 January 2018
Status
ongoing
Keywords
Regulation (Solvency II)
RoRAC
Consumer Preferences
Term Life Insurance
Description
All three papers outlined in this proposal extend and further develop the questions raised in my extant work. The first article focuses on the regulation of insurance companies and directly docks on my Ph.D. thesis. More specifically, I plan to analyze the interaction between the Solvency II standard formula for market risk and the classic performance measure of the insurance industry, i.e., the return on risk-adjusted capital (RoRAC). The results can be expected to provide important insights w.r.t. the impact of the new regulatory environment on an insurers’ asset management decisions. In the second paper, on the other hand, I concentrate on segmentation as well as product strategies for life insurers offering term life products. For this purpose, I draw on a comprehensive data set collected during my dissertation phase and run both cluster analyses and several market simulations with and without competition. In doing so, optimal customer segmentation bases can be derived and recommendations regarding the first-best term life product designs can be made. My results are highly relevant for insurers and have the potential to be a main driver of future success in todays’ competitive markets. Finally, the third paper addresses the well-known problem of accessing benefit-based customer segments. On the one hand, the latter are considered being well-suited w.r.t. the prediction of individuals’ future buying behavior, while, on the other hand, those segments are hardly accessible. Therefore, I want to explain each customer’s segment membership with a (Bayesian) multinomial logit model using various socioeconomic and mortality risk-related characteristics. Such information ensures that term life providers can optimize their distributional efforts in order to reach their target groups more efficiently. To sum up, all papers address important questions and can be expected to extend the current literature on both insurance regulation and consumer preferences for insurance products. Moreover, I believe that they are highly relevant and timely for practitioners in the insurance industry as well.
Leader contributor(s)
Schreiber, Florian
Funder(s)
Topic(s)
Return on Risk-Adjusted Capital under Solvency II: Implications for the Asset Management of Insurance Companies
Range
Institute/School
Range (De)
Institut/School
Eprints ID
247482