ARC Centre of Excellence in Population Ageing

We study the stated demand for longevity, critical illness, and LTC insurance and the extent to which access to critical illness and LTC insurance for health and LTC risk allow individuals to release precautionary savings for the purchase of longevity insurance (annuities). [...] We also find that access to critical illness and/or LTC insurance can release precautionary savings for the purchase of longevity insurance, and that the amount depends on the extent of the critical illness and LTC cover. [...] A table below the configurator simultaneously summarised the outcomes of their choice: the cover provided by critical illness insurance and LTC insurance, the monthly annuity income and remaining retirement savings placed in the savings account. [...] In Table 3, we report the overall preferences for the nine portfolios using two measures: the average of the best-worst (B-W) scores and the standard deviation of the individual B-W scores (Flynn et al., 2007; Louviere et al., 2015).27 A higher average score indicates that the overall preference for the portfolio is higher than for other portfolios. [...] Their model suggests that participants with the average (hypothetical) wealth and pension income in the survey should choose the 100-100 cover for critical illness and LTC, instead of the 50-50 cover that most participants preferred; the predicted annuity amount is nearly zero, which is much less than the stated average for participants with similar wealth and pension levels.