Journal of Insurance and Finance 2021 KCI Impact Factor : 0.67

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pISSN : 2384-3209

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2008, Vol.19, No.3

  • 1.

    The Effect of Economic Variables on Lapse and Surrender Rate in Life Insurance

    최영목 , 최원 | 2008, 19(3) | pp.3~36 | number of Cited : 24
    Abstract PDF
    The purpose of this paper is to test the effect of principle economic variables on lapse and surrender rate for life insurance using the Korean data from the first quarter of FY1998 to the first quarter of FY2008. We employ the explanatory as the economic variables and the dependent variables as the lapse and surrender rate. We examine the following three hypotheses: (i) the emergency fund hypothesis, which asserts that the lapse rate increases when the unemployment rate grows; (ii) the interest rate hypothesis, which suggests that the lapse rate grows when the market interest rate increases because keeping insurance contracts cause the opportunity cost to increase and (iii) the inflation hypothesis, which claims that the lapse rate grows when the rise in consumer price index decreases the real value of claim amount. The empirical results support the emergency fund hypothesis, the interest rate hypothesis, and the inflation hypothesis. In particular, this study indicates that there is a statistically significant relationship between the lapse rate and GDP growth rate, the growth rate of disposal income, unemployment rate, market interest rate, and the growth rate in consumer prices and that the explanation power of the model is high as indicated by the high adjusted R squared value. Taking into account that there could be the contemporaneous correlation among the types of life insurance products, we also use the seemingly unrelated regression(SUR) model. The empirical results show that there is a statistically significant relationship between the lapse rate and unemployment rate, market interest rate, and the growth rate in consumer prices. Our empirical findings suggest that the information of unemployment rate, market interest rate and consumer price index should be reflected in estimating the lapse rate, and represent that the lapse rate estimated using economic variables could be used in establishing the portfolio strategy, marketing strategy and client management strategy.
  • 2.

    Estimating the Rate of Motor Insurance Premium by Double Generalized Linear Model

    Choi, Woo-Suk , Sang-Il Han | 2008, 19(3) | pp.37~57 | number of Cited : 5
    Abstract PDF
    This study estimates the rate of motor insurance premium by using Double Generalized Linear Model(DGLM) under Tweedie’s compound Poisson loss function. Our model used can improve accuracy of estimating fair motor insurance premium by modeling dispersion of the insurance claims as well as their mean. We empirically estimate the rates of premium by using third party motor insurance data for Korea and Australia. The results provide some covariates which explain risk factors simultaneously affect same or opposite direction to the frequency and size of claims. This implies that the DGLM can improve the precision of estimates for car insurance premium rather than assuming constant dispersion. We also observe that a meaningful difference between risk factors of premium in the extent of maximum deviation within the category. The kind of vehicle body displays the largest deviation in discounting(or raising) premium across the risk factors used. The empirical results also shows that the driver’s area of residence is also important risk factor as good as the driver’s age. From our empirical results, a system which discriminates insurance premium by driver’s area of residence could not cause serious polarization problem widening premium gaps between metropolitan areas and provinces.
  • 3.

    Analysis of the Factors Influencing the Solictors’ Choice for a Company in the Cross-selling

    Jung SeChang , 안철경 | 2008, 19(3) | pp.59~82 | number of Cited : 5
    Abstract PDF
    The purpose of this paper is to forecast an aspect of cross-selling and to suggest useful implication to the insurance companies for adopting a cross-selling strategy. The preference for a cross-selling company, product, and the reason for the preference are analysed. We employ the multiple correspondence analysis, one of the most popular in the preference analysis. The findings of this study are as follows: Firstly, The solicitors of large life insurance companies prefer selling motor insurance of large non-life insurance companies. The solicitors of foreign insurance companies prefer selling health insurance and commercial lines of small-medium sized non-life insurance companies. Secondly, health insurance of life insurance companies is preferred by the solicitors of large non-life insurance companies. Variable life and saving-linked insurance of life insurance companies are preferred by the solicitors of smallmedium sized non-life insurance companies. Thirdly, a level of commission is the most important factor in choosing the cross-selling company for the solicitors of large life insurance companies.
  • 4.

    The Effects of the National Pension Wealth on Household Behaviors to hold the Private Pension Wealth and Its Policy Implications

    전승훈 , Lim, Byung-in | 2008, 19(3) | pp.83~117 | number of Cited : 33
    Abstract PDF
    We calculated the lifetime national pension wealth and examined if the national pension wealth has an impact on the household behaviors to hold the private pension wealth, the size of the private pension wealth, and the private pension wealth paid in the monthly premium, with the sample of household heads aged between 45 and 59 selected from the 1st wave of the Korean Retirement and Income Study(KReIS). Our estimation results say that the national pension wealth has no effect on three variables of the private pension wealth with the 10-percent significance level, meaning that the private pension wealth does not shrink from the national pension wealth, and the decrease in the size of the national pension wealth does not stimulate the saving propensity by the private pension wealth. These tell us that a private pension is not a substitute for the national pension, saying that the national pension act revision by cutting down the national pension benefit has a negative influence on the individual income security after retirement. Consequently, the national pension reform might lead to the income inadequacy problems after retirement without an individual effort to increase the private pension saving and thus it implies that the private pension scheme needs to be under consideration as revising the national pension act.
  • 5.

    Benefit Adequacy in Workers’Compensation Insurance

    마승렬 , 김명규 | 2008, 19(3) | pp.119~163 | number of Cited : 12
    Abstract PDF
    The payment methods of permanent disability benefits and survivors benefits in workers’compensation insurance comprise both lump sum and pension payments in Korea. However, workers’actual losses resulting from occupational injuries and illnesses have been greatly underestimated in lump sum payments while workers’actual losses have been significantly overestimated in pension payments. By way of rider, the current payment methods also have the problem of unfairness among age groups. After confirming the adequacy of cash benefits paid, we suggest a plan to improve the current payment methods in workers’compensation insurance. On ahead, we suggest the methods of pension payments reflecting the injured workers’actual losses. And then, we also suggest the methods of lump sum payments considering the properties of age groups.
  • 6.

    The Effects of Population Aging on Human Capital Investment and Financial Markets in Korea

    김기호 , 유경원 | 2008, 19(3) | pp.165~207 | number of Cited : 11
    Abstract PDF
    In Korea, population is rapidly aging as fertility rate declines and longevity increases. Considering these forces the paper analyzes the relationship between the decline in fertility and the investment in human capital at the household level. The paper also analyzes the macroeconomic effects of aging, such as the changes in saving rates, asset returns, and the relative demand for different types of assets, and examines how these effects can be adjusted by the efficient use of human capital. First, we consistently estimate the trade-off between child quantity and quality by exploiting exogenous variation in fertility due to son preferences using the Korea household panel data(1998~2004). The results show that per capita investment in education will be increased by 67~78% as the number of sibling is decreased. This household level result implies that the human capital investment might be increased as the fertility declines in Korea. Next, we forecast and simulate the effect of aging on the financial markets and the demand for the alternative assets using over-lapping generation CGE model. The results show that the return of capital changes around 3% and the proportion of safe assets such as deposits, bonds will be increased as the population is aging and more financial assets will be accumulated when the human capital is efficiently used. These results imply that demographic change in Korea may not necessarily have an adverse effects on financial markets and economic variables and that any such effects are likely to be appropriately adjusted if the accumulated human capital is efficiently used for the increase in the productivity.
  • 7.

    Mutual Fund Tournaments in Korea

    KWANGSOO KO , Yeonjeong Ha | 2008, 19(3) | pp.209~228 | number of Cited : 5
    Abstract PDF
    This paper investigates the mutual fund tournaments and finds that fund agency problems exist in the Korean fund industry. The results are summarized as follows:First, mutual fund tournaments are found in the sense of Brown, Harlow, and Starks(1996). The tournament phenomena are observed in monthly, weekly, and daily returns, which implies the robustness of the empirical results. Second, mutual fund tournaments are remarkable for start-up funds and ceased funds. Third, we fail to find the fund tournaments for public balanced funds and private equity funds. These findings support that observed mutual fund tournaments for public equity fund is robust.
  • 8.

    Ownership Structure·Governance, Firm Performance and Risk taking of the Mutual Saving Banks in Korea

    전선애 , 이민환 | 2008, 19(3) | pp.229~261 | number of Cited : 24
    Abstract PDF
    Savings bank in korea differs from the commercial banks in that the ownership structure is more concentrated and major shareholder often takes part in the management directly or indirectly. We analyze the effect of ownership structure and governance on the performance and riskiness of the savings banks in Korea, by looking at each cases where the percentage share of major shareholders exceed 50%, where the major shareholders are the corporate entity or individual, or the ownership and management separated. Panel regression methodology is employed. ROA, operating costs and interest margin are employed to measure the bank performance. Various measure of non performing loans are used to measure the riskiness of assets. We find that the banks with concentrated ownership exhibit more robust firm performance with higher profitability and lower costs. On the other hand we observe the positive bank performance when shareholders are corporate entities. The concentrated ownership make low the riskiness of the banks with expected default frequency(EDF). This paper concludes that concentrated ownership of the saving banks in Korea has favorable effect on the bank performance with lower riskiness and conjecture this to be the case due to the responsible management activity taken by the major shareholders. The agency theory does not apply in savings banks where the managers tend to take unprofitable risks.