Assessing the impact of suicide exclusion periods on life insurance

Paul Yip*, David Pitt, Yan Wang, Xueyuan Wu, Ray Watson, Richard Huggins, Ying Xu

*Corresponding author for this work

Research output: Contribution to journalArticle

5 Citations (Scopus)

Abstract

Background: We study the impact of suicide-exclusion periods, common in life insurance policies in Australia, on suicide and accidental death rates for life-insured individuals. If a life-insured individual dies by suicide during the period of suicide exclusion, commonly 13 months, the sum insured is not paid. Aims: We examine whether a suicide-exclusion period affects the timing of suicides. We also analyze whether accidental deaths are more prevalent during the suicide-exclusion period as life-insured individuals disguise their death by suicide.We assess the relationship between the insured sum and suicidal death rates. Methods: Crude and age-standardized rates of suicide, accidental death, and overall death, split by duration since the insured first bought their insurance policy, were computed. Results: There were significantly fewer suicides and no significant spike in the number of accidental deaths in the exclusion period for Australian life insurance data. More suicides, however, were detected for the first 2 years after the exclusion period. Higher insured sums are associated with higher rates of suicide. Conclusions: Adverse selection in Australian life insurance is exacerbated by including a suicide-exclusion period. Extension of the suicide-exclusion period to 3 years may prevent some "insurance-induced" suicides - a rationale for this conclusion is given.

Original languageEnglish
Pages (from-to)217-223
Number of pages7
JournalCrisis
Volume31
Issue number4
DOIs
Publication statusPublished - 2010
Externally publishedYes

Keywords

  • Age-standardized mortality rate
  • Australia
  • Life insurance
  • Suicide rate
  • Suicide-exclusion period

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