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

2021. Geneva Papers on Risk and Insurance - Issues and Practice. Pp 1-32. https://doi.org/10.1057/s41288-021-00236-4

C. Escudero H, Jose Ruiz V

Abstract:

In this paper, we analyze the decision-making of retirees from among 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 municipality average years of education) 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.

Palabras claves: Annuities, intermediation, risk rating, decision making, financial literacy.

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