The Market Pricing of Disability Income Insurance for Individuals
DOI:
https://doi.org/10.1016/1057-0810(95)90006-3Abstract
Individuals ’ needs for disability income insurance dominate thosefor life insurance, yet relativelyfew buyersandsellersenterintodisabilitycontractscomparedtolifecontracts. This phenomenon appears contradictory to the existence of a workably competitive market. This study examines the relation of disability income insurance prices to underlying contractual and insurer characteristics. Our results are supportive of a competitive market scenario. We observe a strong relation between prices and elimina- tionperiods, which isconsistentwiththepresence ofadverse selection. Our resultshave implicationsfor how individuals should choose some policy and insurer characteristics, but they also suggest that buyers may need to be better informed about other pricing factors.
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