Dynamic hybrid products in life insurance: Assessing the policyholders' viewpoint

Alexander Bohnert, Patricia Born, Nadine Gatzert

Research output: Contribution to journalArticlepeer-review

11 Scopus citations


Dynamic hybrid life insurance products are intended to meet new consumer needs regarding stability in terms of guarantees as well as sufficient upside potential. In contrast to traditional participating or classical unit-linked life insurance products, the guarantee offered to the policyholders is achieved by a periodical rebalancing process between three funds: the policy reserves (i.e. the premium reserve stock, thus causing interaction effects with traditional participating life insurance contracts), a guarantee fund, and an equity fund. In this paper, we consider an insurer offering both, dynamic hybrid and traditional participating life insurance contracts and focus on the policyholders' perspective. The results show that higher guarantees do not necessarily imply a higher willingness-to-pay, but that in case of dynamic hybrid contracts, a minimum guarantee level should be offered in order to ensure that the willingness-to-pay exceeds the minimum premium the insurer has to charge when selling the contract. In addition, strong interaction effects can be found between the two products, which particularly impact the willingness-to-pay of the dynamic hybrids.

Original languageEnglish
Pages (from-to)87-99
Number of pages13
JournalInsurance: Mathematics and Economics
StatePublished - 1 Dec 2014
Externally publishedYes


  • Constant proportion portfolio insurance
  • Customer value
  • Dynamic hybrid
  • Guaranteed interest rates
  • Life insurance
  • Mean-variance preferences
  • Risk-return profiles


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