Technology , Monopoly , and the Decline of the Viatical Settlements Industry 1
نویسندگان
چکیده
Markets that in which prices depend upon the mortality risk of the insured must necessarily make forecasts about future technological shocks. But how well do markets do in making these forecasts? We exploit the 1996 introduction and dissemination of effective antiHIV medication, which substantially reduced mortality from HIV and AIDS, to test answer this question in the case of the viatical settlement market. In this market, consumers with HIV sell their life insurance policies to firms in return for an up-front payment. Using Freedom of Information Act (FOIA) requests to state insurance regulatory agencies, we have assembled a unique dataset of over twelve thousand viatical transactions from firms licensed in states that regulate viatical settlement markets. We find that the viatical market did a poor job in anticipating the introduction of effective antiretroviral medication in 1995, became overly optimistic about further treatment advances between 1996 and 1998, and then reverted to pessimism (which has thus far been borne out) between 1999 and 2001.
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