Daniel Gottlieb and Kent Smetters

  • 2012 - AP - Prospect Theory Life Insurance and Annuities, by Daniel Gottlieb - 54p
  • 2012 - NBER - Narrow Framing and Life Insurance, Working Paper 18601 - by Daniel Gottlieb and Kent Smetters - 38p 
  • 2016 - AP - Lapse-Based Insurance, by Daniel Gottlieb and Kent Smetters - 83p
    • This paper was previously titled “Narrow Framing and Life Insurance.”
  • 2019 - AP - Lapse-Based Insurance, by Daniel Gottlieb and Kent Smetters - 100p
  • 2021 (Update) - AP - Lapse-Based Insurance.  American Economic Review, 111 (8): 2377-2416, by Daniel Gottlieb and Kent Smetters - 101p
  • (p4-5) - 2.1 Substantial Lapsing
    • LIMRA, a large life insurer trade association, and the Society of Actuaries define an insurance policy lapse as “termination for nonpayment of premium, insufficient cash value or full surrender of a policy, transfer to reduced paid-up or extended term status, and in most cases, terminations for unknown reason” (LIMRA 2011A, P. 7).
    • As Figure 1(a) shows, 29% of permanent insurance policyholders lapse within just three years of first purchasing the policies; within 10 years, 57% have lapsed.
      • In particular, nearly 88% of universal  life policies, a popular type of permanent insurance, do not terminate with a death benefit claim.

⇒ 2021 (Update) - AP - Lapse-Based Insurance - American Economic Review, 111 (8): 2377-2416, by Daniel Gottlieb and Kent Smetters - 101p

  • Life insurance is a large yet poorly understood industry.
    • Most policies lapse before they expire.

2012 - NBER - Narrow Framing and Life Insurance, Working Paper 18601 - by Daniel Gottlieb & Kent Smetters - 38p 

  • 2023 1130 - NAIC Proceedings - NAIC/Consumer Liaison Committee - 21p
  • 9. Heard a Presentation on How Much Life Insurance Purchased in the U.S. Becomes a Death Claim
    • Richard Weber (Consumer Representative) provided a presentation based on the paper Lapse-Based Insurance, published in 2016 and updated in 2021. The paper was written by David Gottlieb (London School of Economics and Wharton School, University of Pennsylvania) and Kent Smetters (Wharton School, University of Pennsylvania).
      • 2016 - AP - Lapse-Based Insurance, by Daniel Gottlieb and Kent Smetters - 83p
      • 2021 (Update) - AP - Lapse-Based Insurance.  American Economic Review, 111 (8): 2377-2416, by Daniel Gottlieb and Kent Smetters - 101p
    • Weber said most individual life insurance policies lapse before expiration. Weber said over 70% of U.S. families own life insurance, and annual premiums exceed $110 billion. Weber said between 1990 and 2010, there were $30.8 trillion in life insurance issued and $24 trillion in life insurance lapses. Weber said 25% of permanent insurance policyholders lapse within just three years of first purchasing their policies, and 40% lapse within 10 years. Weber said nearly 88% of universal life policies ultimately do not terminate with a death-benefit claim, and almost 85% of term policies fail to pay a death claim.
    • Weber said lapses are more prevalent for smaller policies and are more exposed to background shocks, including unemployment, medical expenses, and new consumption opportunities. Weber said insurance agents receive most of the sales commission in the first or second year and, anecdotally, consumers are more likely to lapse their policies when they are not in contact with their sales agent. When policies are sold primarily based on the illustration, Weber said customer dissatisfaction may result when they see lower results than initially illustrated. Weber said commissions continue to be the driver of sales behavior in a number of cases and lapses often follow a failure to consider the client’s best interests and the suitability of the recommendation.
    • Weber requested state insurance regulators to review how policy illustrations should be prepared under current state regulation and evaluate the experience of the New York Department’s Insurance Regulation 187. Weber said state insurance regulators should move toward requiring insurance carriers and insurance producers to only make policy recommendations that are suitable to the consumer’s circumstances and place the client’s interest above the interest of the producer.