uncertain by definition. Trends in population mortality are, however, more reliable and can provide guidance when insurance longevity experience is revised. The most recent revision in the Swedish life tables dates from 2007, replacing tables originating from 1990, which had become outdated especially for older ages.

To the extent people have grounds to believe they will live a shorter or longer life than average, they would choose between 5 and 10 year withdrawals or life annuities on the basis of this information. Information asymmetry can give rise, thus, to adverse selection. If the insurer has information - or perhaps just a belief - that his clients will live longer than the normal population, life annuities will be priced higher to compensate for this profile.

There is no statistical evidence on the distribution of motives for claiming a 5 or 10 year payment period, although this would certainly be interesting to study. Nevertheless, it seems safe to assume that the demand for withdrawals for periods shorter than a whole life is largely driven by the desire to supplement income in the earlier years of retirement rather than adverse selection. Yet, insurers are certainly wise to assume that adverse selection is present to some extent, since this is the result of individuals looking after their own interests. Note that the PPM offers only a _life_ annuity to _all_ participants. This eliminates the possibility of adverse selection, and all other things equal, makes a higher annuity payment possible for persons with longer lives, albeit at the expense of persons who have good reason to believe that their lives will be shorter than normal.

Finally, we can note that the PPM offers a voluntary survivor benefit during the accumulation phase. The PPM cannot require medical information so it cannot judge individual risks. Since the PPM actuaries believe this product is chosen by persons who have reason to believe they will have shorter than normal lives the price for this product is higher than it would be if the actuaries believed that the subscribers were from the “normal” population. This is a clear illustration of an insurer’s caution given the risk of adverse selection. If it becomes known that persons with high risks are disproportionately represented in the insurance collective – or simply if it is rumored – and that the insurer prices thereafter, then informed low risk persons will avoid this insurance product, leading to a potential spiral of price increases that lead to greater avoidance, etc. Obviously, the way to combat this sort of process and still retain the insurance is to either require medical examinations that allow the pricing of risks in accordance with relevant risk information or to create a large randomly chosen population, for example by making the insurance mandatory.

# **_4.5 Final Remarks_**

In sum, the private insurance market in Sweden is dominated by seven of the over forty insurance providers. Three of these companies are owned by three of the largest banks. These are the major actors in the provision of both individual voluntary and occupational group insurance. In 2006, the market value of the total assets of private individual and contractual insurance for retirement equaled 80 percent of GDP and total premium payments were 6.8 percent of GDP.

The seven largest private insurance providers are also the main managers of the PPM funds. In 2007, they managed 43 percent of all PPM assets and owned 70 percent of the 50 largest funds registered in the PPM scheme. The public default (Seventh AP) fund managed another 29 percent of assets, so, together eight companies managed about 72 percent of total PPM 37