City Research Online

Abstract

We analyse the mortality of couples by fitting a multiple state model to a large insurance data set. We find evidence that mortality rates increase after the death of a partner and, in addition, that this phenomenon diminishes over time. This is popularly known as a “broken-heart” effect and we find that it affects widowers more than widows. Remaining lifetimes of joint lives therefore exhibit short-term dependence. We carry out numerical work involving the pricing and valuation of typical contingent assurance contracts and of a joint life and survivor annuity. If insurers ignore dependence, or mis-specify it as long-term dependence, then significant mis-pricing and inappropriate provisioning can result. Detailed numerical results are presented.

Publication Type:	Article
Additional Information:	Copyright Cambridge University Press 2012
Publisher Keywords:	Joint lives, Multiple life contingencies, Broken-heart syndrome, Short-term dependence
Subjects:	H Social Sciences > HG Finance
Departments:	Bayes Business School > Actuarial Science & Insurance
SWORD Depositor:	Symplectic Administrator

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