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Choosing the highest annuity payout: the role of intermediation and firm reputation

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Abstract

In this paper, we analyse retirees’ decision-making from the different bids made available by life insurance companies in the Chilean annuity market. We find that choosing the highest annuity payout was positively (negatively) correlated with the advice given by independent brokers (sales agents and average years of education in the municipality) for a January 2008–May 2018 sample. We also found that retirees were willing to pay for firm reputation. In addition, people who are more likely to take a pension payout without consulting intermediaries are older, married, have a higher pension balance and purchase an immediate annuity. These findings are of interest to those seeking to improve the efficiency and effectiveness of the annuity system.

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Fig. 1

Source Authors’ calculations, based on CMF data

Fig. 2

Source Authors’ own elaboration

Fig. 3

Source Authors’ own elaboration

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Notes

  1. The Unidad de Fomento (UF) is a unit of account used in Chile and is adjusted by inflation. 1 UF is equivalent to USD 31.5, as of 31 December 2019.

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Authors and Affiliations

  1. Faculty of Economics and Business, University of Chile, Diagonal Paraguay 257, 8330015, Santiago, Chile

    Cristian Escudero & José L. Ruiz

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  1. Cristian Escudero
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  2. José L. Ruiz
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Correspondence to José L. Ruiz.

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Appendix

Appendix

See Tables 5, 6, 7, 8, 9, 10, 11, 12.

Table 5 LIC choice by risk rating classification
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Table 6 Number of acceptances according to the intermediation request (January 2008–May 2018)
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Table 7 Description of the variables
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Table 8 Pensions accepted
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Table 9 Choosing the best life annuity payout—descriptive statistics: means
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Table 10 Choosing the highest annuity payout—correlation matrix for the variables
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Table 11 Use of intermediaries—descriptive statistics: means
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Table 12 Use of intermediaries—correlation matrix for the variables
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Escudero, C., Ruiz, J.L. Choosing the highest annuity payout: the role of intermediation and firm reputation. Geneva Pap Risk Insur Issues Pract 47, 973–1004 (2022). https://doi.org/10.1057/s41288-021-00236-4

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  • DOI: https://doi.org/10.1057/s41288-021-00236-4

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