What Policy Features Determine Life Insurance Lapse? An Analysis of the German Market

What Policy Features Determine Life Insurance Lapse? An Analysis of the German Market

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Article ID: iaor201522191
Volume: 81
Issue: 2
Start Page Number: 241
End Page Number: 269
Publication Date: Jun 2014
Journal: Journal of Risk and Insurance
Authors: ,
Keywords: risk
Abstract:

With the largest data set ever used for this purpose (covering more than 1 million contracts), we analyze the impact of product and policyholder characteristics on lapse in the life insurance market. The data are provided by a German life insurer and cover two periods of market turmoil that we incorporate into our proportional hazards and generalized linear models. The results show that product characteristics such as product type or contract age and policyholder characteristics such as age or gender are important drivers for lapse rates. Our findings improve the understanding of lapse drivers and might be used by insurance managers and regulators for value‐ and risk‐based management.

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