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Narrow Framing and Life Insurance / Daniel Gottlieb, Kent Smetters.
- Format:
- Book
- Author/Creator:
- Gottlieb, Daniel.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w18601.
- NBER working paper series no. w18601
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2012.
- Summary:
- Life insurance is a large yet poorly understood industry. A final death benefit is not paid for a majority of policies. Insurers make money on customers that lapse their policies and lose money on customers that keep their coverage. Policy loads are inverted relative to the dynamic pattern consistent with reclassification risk insurance. As an industry, insurers lobby to ban secondary markets despite the liquidity provided. These (and other) stylized facts cannot easily be explained by information problems alone. We demonstrate that a simple model of narrow framing, where consumers do not fully account for their need for future liquidity when purchasing insurance, offers a simple and unified explanation.
- Notes:
- Print version record
- December 2012.
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