The Study Of Personal Annuity Allocation Based On Longevity Risk

With the development of medical and health services, as well as the improvement of living standards, the life expectancy of people has been increased continuously. The aging society as a whole brought in longevity risk. The longevity risk will cause the shortage of old-aged supporting resource and the decline of standard of living. Annuity has became an effective tool to control longevity risk, because it could pay the premium to purchaser, until he will die. In the perspective of social individual, the paper explored the factors which affected the decision of allocation of annuity, as well as these factor how to influence investors’decision. By setting up investor’s decision model, the paper selectively analyzed the function of factor such as survival probability,risk preference,bequeath motive, the rate of annuity fund investment, annuity administration expense,in the process of annuity allocation. The rising of the rate of annuity fund investment and survival probability could cause more people to purchase annuity. The increase of annuity administration expense and bequeath motive could cause less people to purchase annuity.The paper suggested that the bequeath motive is common in general investors。 The existence of the bequeath motive reduces purchase intention of investor. Meanwhile,it limits the function of the control longevity risk of annuity. The paper proposed an improvement plan of annuity in order to cause more people to invest annuity and to give full play to the function of the control longevity risk. On the basis of original annuity design,the improvement plan increased a new choice for the investors. The new choice would offer the investors’ inheritor last payment from insurance company after his death Therefore, the bequeath motive of investor could be met. For the investor, the bequeath motive could not investor’s allocation of annuity. The function of the annuity to_control longevity risk would give full play.The paper systematically has taken investors’bequeath motive into account to explore how to allocate personal annuity in order to controlling longevity risk. By combining with the actual situation of our country and analyzing the factors which influenced the general investor’s decision of allocation of annuity, the paper could find the best period of annuity allocation,in order to improve investor’s welfare level after retirement. In the meantime, the new design of annuity would be helpful to the innovation and income of life insurance corporation.