We estimate the benefit of life-extending medical treatments to life insurance companies. Our main insight is that life insurance companies have a direct benefit from such treatments as they lower the insurer's liabilities by pushing the death benefit further into the future and raise future premium income. We apply this insight to immunotherapy, treatments associated with durable gains in survival rates for a growing number of cancer patients. We estimate that the life insurance sector's aggregate benefit from FDA approved immunotherapies is $9.8 billion a year. Such life-extending treatments are often prohibitively expensive for patients and governments alike. Exploiting this value creation, we explore various ways in which life insurers could improve stress-free access to treatment. We discuss potential barriers to integration and the long-run implications for the industrial organization of life and health insurance markets, as well as the broader implications for medical innovation and long-term care insurance markets.
Koijen, Ralph, and Stijn Van Nieuwerburgh. "Combining Life and Health Insurance." Quarterly Journal of Economics (forthcoming).
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