Abstract

This study investigates the extent to which yields to policyholders on cash-value life insurance have been adjusted over time to compensate for inflation. The results for a sample of Canadian policies suggest little adjustment has been made for inflation over the 1960s and especially the 1970s. This non-adjustiment is traceable to significant slippage a( each stage of the process leading from a change in inflation to a change in policy dividends. Such slippage might not occur, and might even work to policyholders' advantage, in future scenarios which are unlike the experience of 1962-81.

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