行为经济学与寿命问题

Behavioraleconomicsandthelongevity problem Craig W. Reynolds, FSA, MAAA Fear of outliving retirement savings is common for retirees or thosefacing the decision of when to retire. Thisfearis exacerbated by thecontinuing decline of defined benefit(DB)pension plans.According tothe Congressional Research Service, only about 10 million activeAmerican workers are covered by defined benefit pension plans, downfrom around 30 million in the early 1980s.1 The insurance industry is uniquely positioned tofill the gap left by the decline of such plans, primarilyutilizingpayoutannuities, including deferred income annuitiesand Guaranteed Lifetime Withdrawal Benefits (GLWB) on indexed orvariable deferred annuities.Yet market penetration for these products is relatively low. Why don’t more people buy annuities?Many reasons are commonly cited, including: Lack ofunderstandingof longevity riskLack of awareness or understanding ofannuitiesAsset concentrationor liquidityconcernsPerceived to be expensiveTax-deferred but, unlike life insurance, not tax-freeNo trigger eventssuch as marriage,birth of children,or home purchaseto motivate purchaseConcern thatinsurers may not be able to deliver on theirpromises However, the classicbehavioraleconomicsresearch of Daniel Kahneman and Amos Tversky inProspectTheorymay provideinsight into why annuities are not as popular as life insurance.More importantly,ProspectTheory mightprovideclues as to how to design andmarketannuity products to make them more attractiveto consumers. In this paper we provide an overview of Kahneman and Tversky’s theory, postulate how their work might apply to lifeinsurance and annuities, and use the insights gained to suggest a new product concept thatcouldbe thebreakthrough product insurers need to enter the longevity insurance market in a new and successful way. ProspectTheory ProspectTheory is, at its core, an explanation of how people evaluate risk. Itexplainswhypeople sometimes make whatappear to be irrational or inconsistent decisions depending on how their choices areframed.Kahneman and Tverskypioneered work in this field in the 1970s, leading to a Nobel Prize for Kahnemanin 2002.(Tversky diedin 1996.) Unlike prior models of decision making, in which the decision maker is assumed to be fully rational and utility-maximizing (e.g.,Von Neumann & Morgenstern2), Kahneman and Tversky demonstrated that people weigh gainsand losses quite differently,and altertheirdecisionsaccordingly,depending on whether they see a decision outcomeas a gain or a loss.As a result, people can switch their preferences for risk simply by how the outcome of a decision is framed—whether something is gained or lost influences its perceived value, and losses loom larger than gains. Inother words, the prospect of a loss hurts more than the pleasure ofananticipatedgain of a similar magnitude.Acrossmultiple decades of research, decision makers have been shown to shift their preferences in the direction of lossavoidance, even if that means adopting a position of risk—even without compensation for doing so.These“preference reversals” violate a central tenet of traditional, economic models of decision making,in which a decisionmaker isassumed to befully rational. This is more than an issue ofa nonlinear utility function. When faced witha decision, the choicesthat individualsmake will tend to change with the framing of the question, even if the underlying economics are not changing. A simplepair of choicesillustrates theconcept of preference reversal, which is a keyexperiment inProspectTheory. Suppose that 600 people are expected to die of the flu. Two treatment options are available. Treatment A will save 200 people with 100% certainty.Treatment B will saveeveryonewith aone-thirdchance andnoone with atwo-thirdschance. Kahnemanand Tversky’s seminalresearch3showed that 72% of their sample would chooseTreatmentA.This isinteresting in and of itself,becausethese options are in some sense equivalent, as they have the same expectedvalue.Each treatment has an expected value of 200 people being saved.However, in this scenario,mostdecisionmakers preferred the certainty of saving at least some of the lives. Now consider an alternative way to present the same treatment options: If TreatmentCis used, 400 people will die.If TreatmentDis used, there is aone-thirdchance thatno onedies and atwo-thirdschance thateveryone dies. Their research showed that 78% will chooseTreatmentDoverTreatmentCin this choice presentation.In this case,decision makers choose the gamble despite the potential loss of all lives.Unlike in the first scenario,where theypreferred thecertainty of saving lives, in the second they preferred the option that offered thepossibility that no onemight die. This is a simple example of preference reversal. In all scenarios, the expected outcome of the decision (the expectedvalue of the number of people saved versusthe number of peoplewhodie) is the same.What changes is wheth