Subjective Survival Probabilities Research Articles

Expectations, Life Expectancy, and Economic Behavior

This study analyzes responses to a questionnaire designed to elicit subjective expectations and probabilities of survival. People do extrapolate past improvements in longevity when they determine their subjective horizons and they are fully aware of levels of and movements within todays life tables. The subjective distribution has greater variance than its actuarial counterpart; and the subjective variance decreases with age. The implications of these findings for optimal Social Security for the construction of annuities for the analysis of savings behavior and for evaluating lifetime earnings are discussed. The data were collected in the United States from a sample of 411 white male economists and a sample of 363 white males in a midwestern SMSA. (EXCERPT)

An Analysis of the Demand for Life Insurance: Mathematical Foundations

A new approach to the topic of life contingencies based on matrix analysis is introduced. Life insurance providing for cash-values is reinterpreted. It is proved that a consumer's optimal savings mix cannot include simultaneously life insurance and an endowment if there are transaction costs. The computation of the effective rate of return on life insurance is analyzed and seen to be related to the consumer's subjective survival probability. The purpose of the first of these companion papers is to introduce a new approach to the topic of life contingencies based on matrix analysis. Hopefully this approach will help the reader understand better the savings concept inherent in life insurance. For the sake of generality, the concept of a life contingent (LC) contract is introduced. An LC contract between an insurer and the policyowner, hereafter called consumer, is an arrangement the conditions of which depend upon the consumer's survival and under which the insurer is restricted to the role of a debtor.