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Behavioral Economics in Practice – Annuity and Wealth Products

Background and Purpose

“The term Homo economicus, or economic man, is the portrayal of humans as agents who are consistently rational and narrowly self-interested, and who pursue their subjectively defined ends optimally.” Per Wikipedia (9/6/22).  The starting point of actuarial science for most of the time. 

This project proposes to look at how human behavior differs from the modeled behavior as it is applicable to annuity and wealth products.  Achieving a better understanding of their way of looking at these decisions can help actuaries make better predictions. 

Research Objective

The Actuarial Innovation & Technology Steering Committee (AITSC) is interested in how the behavioral economic question is phrased, what hypothesis is to be tested, what tasks are to be deployed to address that question (surveys, A/B testing, or other mechanisms), what metrics are to be used and all other elements of the case study selected.  

The AITSC encourages researchers to respond to this RFP even if their bid does not perfectly match the purpose above.  The AITSC is eager to work with researchers on a mutually agreed scope of research

Annuity and Wealth Accumulation Products Focus

This particular Request For Proposal focuses on annuity insurance and other wealth products.  The AITSC would like to explore how to concretely apply behavioral science concepts to this type of insurance product, with a deliverable that would help the readers understand how these concepts apply to the insurance products selected.  This could focus on a single narrow aspect of the insurance cycle or broader applicability to this type of insurance product.

  • Customer experience when interacting with an onboarding platform
  • Lapse
  • Choice in fund selection and/or crediting rate mechanism
  • Utilization of benefits and riders like GMWB, GMIB, GMAB
  • Design an exchange program
  • Reaction to an awareness campaign
  • Utilization of riders and options in policies
  • Reaction to engagement programs
  • etc

Proposal Requirements

To facilitate the evaluation of proposals, the following information should be submitted: 

  1. Resumes of the researcher(s), including any graduate student(s) expected to participate, indicating how their background, education and experience bear on their qualifications to undertake the research. If more than one researcher is involved, a single individual should be designated as the lead researcher and primary contact. The person submitting the proposal must be authorized to speak on behalf of all the researchers as well as for the firm or institution on whose behalf the proposal is submitted.
  2. An outline of the approach to be used (e.g. literature search, model, survey, interviews etc.), emphasizing issues that require special consideration. Details should be given regarding the techniques to be used, collateral material to be consulted, reusability and possible limitations of the analysis. 
  3. A description of the expected deliverables and any supporting data, tools or other resources. Consideration should be given to the preference for externalized data that can be included in the AITPSC’s data repository. 
  4. Cost estimates for the research, including computer time, salaries, report preparation, material costs, etc. Such estimates can be in the form of hourly rates, but in such cases, time estimates should also be included. Any guarantees as to total cost should be given and will be considered in the evaluation of the proposal. While cost will be a factor in the evaluation of the proposal, it will not necessarily be the decisive factor. 
  5. A schedule for completion of the research, identifying key dates or time frames for research completion and report submissions. The AITPSC is interested in completing this project in a timely manner. Suggestions in the proposal for ensuring timely delivery, such as fee adjustments, are encouraged. 
  6. A specific proposal for how to engage Society of Actuaries members should be included. Examples used in past work include articles, webinars, panel discussions, and formal reports. The method of communicating the results should be part of the proposal.  Requests for information about past communication efforts in this area should be directed to David Schraub (see below). 
  7. Other related factors that give evidence of a proposer's capabilities to perform in a superior fashion should be detailed. 

Selection Process

The AITPSC will appoint a Project Oversight Group (POG) to oversee the project. The AITPSC is responsible for recommending the proposal to be funded. Input from other knowledgeable individuals also may be sought, but the AITPSC or POG will make the final recommendation, subject to SOA leadership approval. SOA will provide staff actuarial support to develop and publish the final material.

Questions

Any questions regarding this RFP should be directed to David Schraub, SOA Senior Research Actuary (phone: 847-706-3560; email:  dschraub@soa.org)

Notification of Intent to Submit Proposal

If you intend to submit a proposal, please e-mail written notification by October 31, 2022, to Korrel Crawford (kcrawford@soa.org).

Submission of Proposal

Final proposals for the project should be sent via e-mail by November 16, 2022, to Korrel Crawford (kcrawford@soa.org).  Note: Proposals are considered confidential and proprietary.

Conditions

The selection of a proposal is conditioned upon and not considered final until a Letter of Agreement is executed by both the Society of Actuaries and the researcher. 

The SOA and AITPSC reserve the right to not award a contract for this research. Reasons for not awarding a contract could include, but are not limited to, a lack of acceptable proposals or a finding that insufficient funds are available. The SOA and AITPSC also reserve the right to redirect the project as is deemed advisable. 

The SOA and AITPSC plan to hold the copyright to the research and to publish the results with appropriate credit given to the researcher(s). 

The SOA and AITPSC may choose to seek public exposure or media attention for the research. By submitting a proposal, you agree to cooperate with the SOA and AITPSC in publicizing or promoting the research and responding to media requests. 

The SOA and AITPSC may also choose to market and promote the research to members, candidates and other interested parties. You agree to perform promotional communication requested by the SOA and AITPSC, which may include, but is not limited to, leading a webcast on the research, presenting the research at an SOA meeting, and/or writing an article on the research for an SOA newsletter.