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Investigating the broken-heart effect: a model for short-term dependence between the remaining lifetimes of joint lives

Spreeuw, J. & Owadally, M. I (2013). Investigating the broken-heart effect: a model for short-term dependence between the remaining lifetimes of joint lives. Annals of Actuarial Science, 7(2), pp. 236-257. doi: 10.1017/s1748499512000292

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:
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