TY - JOUR
T1 - Impact of Flexible Periodic Premiums on Variable Annuity Guarantees
AU - Bernard, Carole
AU - Cui, Zhenyu
AU - Vanduffel, Steven
N1 - Publisher Copyright:
© 2017, Copyright © Society of Actuaries.
PY - 2017/1/2
Y1 - 2017/1/2
N2 - In this article, we study the fair fee of a flexible premium variable annuity (FPVA), in which the policyholder can choose to pay periodic premiums during the accumulation phase instead of a single initial premium. We are able to express fair fees using a fast and accurate approximation based on bounds on the price of the FPVA. We identify scenarios that are particularly costly for the insurer. Our study could help insurers estimate the magnitude of typical underpricing when offering flexible-premium variable annuities with the same fee as the corresponding single-premium variable annuity.
AB - In this article, we study the fair fee of a flexible premium variable annuity (FPVA), in which the policyholder can choose to pay periodic premiums during the accumulation phase instead of a single initial premium. We are able to express fair fees using a fast and accurate approximation based on bounds on the price of the FPVA. We identify scenarios that are particularly costly for the insurer. Our study could help insurers estimate the magnitude of typical underpricing when offering flexible-premium variable annuities with the same fee as the corresponding single-premium variable annuity.
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U2 - 10.1080/10920277.2016.1209119
DO - 10.1080/10920277.2016.1209119
M3 - Article
AN - SCOPUS:84984712146
SN - 1092-0277
VL - 21
SP - 63
EP - 86
JO - North American Actuarial Journal
JF - North American Actuarial Journal
IS - 1
ER -