Investigating the Broken-Heart Effect: a Model for Short-Term Dependence between the Remaining Lifetimes of Joint Lives

We analyze 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.

Regulating for Quality in the Voluntary Sector

The implementation of the NHS and Community Care Act, the greatly increased use of voluntary sector providers and the switch from grants to contracts form the background to this study. The article brings together two main themes in current social policy debate in the personal social services: regulation and quality assurance. Contracts are seen as increasingly significant forms of input, process and output regulation, although their impact depends upon their type and specificity and upon the capacity of purchasers to monitor contract compliance, and the sanctions available to them. Clarification of the conceptual framework is followed by the report of an empirical study of the position in a single large county. The results from this study are then discussed in the context of evidence from other parts of Britain and the United States. The main issues identified in this discussion are competition, consumer choice, user involvement, the dangers of excessive and inappropriate regulation, the importance of trust and risk, and the relationship of resources to quality.

Indexing long-term financial contracts

This paper has two functions: first, in part 1, to present briefly the results of some recent investigations into the behaviour of a price index (in the United Kingdom) in order to gain some insight into the possible future progress of inflation; secondly, in parts 2–4, to present the arguments in favour of the linking to a price index of financial instruments, in particular government stocks, life assurance contracts and pension fund benefits. Part 1 is heavily statistical, and those who prefer the controversial material can go straight to part 2, noting only the conclusion to part 1, viz.: that it is not easy to forecast inflation over any lengthy period. Parts 2–4 are controversial, and I expect will still be topical when the paper is presented. I make no pretence to be impartial; I am convinced that widespread index-linking of long-term contracts would have a beneficial effect on the conduct of our financial affairs. It is up to those who disagree with me to put their case in the discussion; but I hope my supporters will express their views too.

Some Aspects of Withdrawals in Ordinary Life Business

SynopsisThe increasing competition from other forms of savings media which emphasise a favourable return on termination makes it desirable to reconsider the existing attitudes of the Life Offices to withdrawals. The aim of the paper is to discuss the current level of withdrawal rates and associated benefits for ordinary life assurance contracts.In Section I a method of determining crude withdrawal rates is demonstrated and in Section II some of the factors which influence these rates are discussed.The effect on immunization theory of the introduction of the concept of “contractual” withdrawal benefits is considered in Section III and in Section IV the current levels of withdrawal benefits and the margin for contingencies and profits are examined.