ARIA 2021 Annual Meeting

Jonas Raphael Jahnert, Institute of Insurance Economics, University of St. Gallen; Hato Schmeiser, Institute of Insurance Economics, University of St. Gallen; Florian Schreiber, Lucerne University of Applied Sciences and Arts

Life insurances companies are highly regulated. These regulations do not only include solvency requirements, but also comprise product pricing. In other industries, companies aim to increase producer rents by using information in respect to the policyholder’s willingness to pay, which allows them to endeavor price discrimination if no perfect competition prevails. In this paper, we investigate the pricing behavior in German Term Life insurance market by analyzing market prices, actuarial fair pricing and the willingness to pay for eighteen customer groups and three product categories. The results show that premiums charged for budget Term Life insurance products are in some cases even below the actuarial fair price. For premium products, regulation and market conditions hinder life insurance company to employ price discrimination.