Work

Mandated Annuitization, Gender‐Neutral Pricing, and the Possibility of Negative Correlation Between Risk Type and Purchase Level

Year: 2026

Type: article

Abstract: ABSTRACT Mandated annuitization is often proposed to eliminate the inefficiency caused by the positive correlation between risk type and purchase level in insurance markets. We revisit this solution in a mandatory annuity program with partial waiver, which is empirically relevant. With the standard assumptions of positive health—wealth correlation as well as gender gaps in health and wealth, we obtain two main results. First, under gender‐based pricing, the correlation of risk type and purchase level is still positive even though annuity purchases are mandatory. Second, based on decomposing the severity of distortion due to mandated annuitization under gender‐neutral pricing into the within‐group and between‐group effects, it is shown that risk type and purchase level may be negatively correlated if the between‐group effect is stronger than the within‐group effect.

Source: Journal of Public Economic Theory

DOI: 10.1111/jpet.70136

Authors: Sau‐Him Paul Lau, Yinan Ying, Qilin Zhang

Institutions: University of Hong Kong, Lingnan University, Hong Kong Polytechnic University

Language: English

Topic: Insurance and Financial Risk Management

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Reduced inequalities

Open Access status: hybrid

Estimated APC paid: $3,350