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Article
The Chilean Electronic Market for Annuities (SCOMP): Reducing Information Asymmetries and Improving Competition
The Geneva Papers on Risk and Insurance - Issues and Practice (2017)
  • Marco Morales
  • Guillermo Larraín, Universidad de Chile
Abstract
The Chilean Electronic Market for Annuities was created in 2004 in order to correct several malfunctions of the market for annuities. The Chilean Pension System is composed of two phases. On the accumulation phase, savings are collected and managed by asset managers. The payout phase consists in pension payments mainly in the form of annuities and programmed withdrawals (offered by Life Insurance Companies and Pension Fund Administrators, respectively).
The SCOMP or Electronic Consultation and Offer System for Annuities and Phased Withdrawals, replaced the traditional way the pensioners looked for and bought retirement products in the Chilean market.  This electronic quotation system was created to help reducing search costs, as well as allowing pensioners to choose the best available deals offered by providers.
Overall, this paper finds that the new quotation system raised annuity payments by 15%, after controlling for other regulatory changes and the main determinants of annuity rates.  The database used for the econometric analysis goes from January 2001 to June 2008, with the implementation of the SCOMP located at the middle of the sample, and considering all the 131,226 annuity policies sold during this period.  The exogenous variables explaining the level of the annuity rates are a combination of individual and provider characteristics, given that the estimated equation corresponds to a reduced form representation of the underlying structural supply-demand model for annuities.
Keywords
  • Annuities,
  • Pensions
Publication Date
Summer July, 2017
DOI
10.1057/s41288-017-0054-3
Citation Information
Marco Morales and Guillermo Larraín. "The Chilean Electronic Market for Annuities (SCOMP): Reducing Information Asymmetries and Improving Competition" The Geneva Papers on Risk and Insurance - Issues and Practice Vol. 42 Iss. 3 (2017) p. 389 - 405 ISSN: 1018-5895
Available at: http://works.bepress.com/marco_morales/13/