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Surrender contagion in life insurance - ScienceDirect
Source: sciencedirect.com
Article summary:
1. This paper models surrender contagion in a heterogeneous pool of life insurance policyholders, introducing a history-dependent surrender process for non-professionals.
2. Contagion profits insurers at the expense of non-professional policyholders without threatening solvency.
3. Surrenders structurally differ from bank deposit withdrawals by leaving assets behind.
Article analysis:
The article is generally reliable and trustworthy, as it provides an in-depth analysis of the impacts of mass surrenders on life insurers and their policyholders. The authors provide evidence to support their claims, such as citing relevant literature and providing numerical results from their model. Furthermore, the authors present both sides of the argument fairly, noting that while contagious surrenders can benefit insurers, they can also be detrimental to individual policyholders’ financial positions.
However, there are some potential biases in the article that should be noted. For example, the authors focus mainly on how contagious surrenders affect life insurers and individual policyholders, but do not explore how they may impact other stakeholders such as brokers or reinsurers. Additionally, the authors do not discuss any potential risks associated with contagious surrenders or any possible counterarguments to their claims. Finally, while the article does provide evidence to support its claims, it does not explore any alternative explanations for its findings or consider any other factors that may influence mass surrenders and their impacts on life insurers and policyholders.