Defined terms for the annuity market and lifetime income landscape.
Hyperbolic discounting is a pattern of time preference in which the rate at which individuals discount future outcomes declines as the delay grows longer, producing a stronger preference for the near term over the medium term than for the medium term over the far term.
Idiosyncratic longevity risk is the individual-level random variation in lifespan — the risk that any specific person lives meaningfully longer or shorter than the expected lifespan for someone with their characteristics.
Idiosyncratic versus systematic risk in pooling is the distinction between longevity risk that varies independently across pool members and can be diversified in a large pool, and longevity risk that varies in common across all members and cannot be diversified no matter how large the pool.
Illustration regulation is the set of rules governing how projected future values of an annuity contract may be presented to an individual in connection with the sale of the contract, including requirements for showing multiple scenarios, and prohibitions on misleading presentations.
