Managing policy lapse risk in Sweden’s life insurance market between 1915 and 1947

Adams, Mike; Andersson, Lars; Lindmark, Magnus; Eriksson, Liselotte; Veprauskaitė, Elena

doi:10.1080/00076791.2017.1418331

Cited by 4 publications

(1 citation statement)

References 20 publications

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“…Regression analysis using panel data has been the most commonly used technique in econometrics and statistics due to its flexibility for comparison with other models [9]. Several scholars (see [10], [11] and [12]) studied the macroeconomic effect on lapse rate using this method and reported a concrete conclusion.…”

Section: Literature Reviewmentioning

confidence: 99%

Lapsation Risk: Takaful Operators In Malaysia

Nurul Hazwany Shamsuddin,

Siti Aida Sheikh Hussin,

Zalina Zahid

et al. 2023

AMCI

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Insurance serves as a tool for risk management. Takaful is an Islamic insurance where the concepts of mutual cooperation (ta’awun) and donation (tabarru’) are used as the main pillars. Apart from the usual market and credit risk, lapsation risk is one of the main risks faced by a life insurer. It is important to determine factors that may influence policy lapsation as it could affect the solvency and the profitability of insurance or a Takaful operator. Therefore, the relationship between surrender rates and economic variables (Unemployment Rate, Real Interest Rate, Growth Domestic Product (GDP), Inflation - Annual % change in Consumer Price Index and Stock Market Price Index (%) ) were examined for Takaful operator ordinary life and unit investment link products. Out of sample forecast was performed for 2019 to 2020 surrender rates for Takaful operator ordinary life and unit investment link products. Panel data model was applied for both purposes as the method is viable to overcome small sample size issue. The empirical findings revealed that the economic variable displayed a different impact on the surrender rate for both products. Both ordinary life and investment linked products exhibited a significant relationship between unemployment rate and surrender rate; in which higher unemployment rate led to increased surrender rate. Stock also had a statistically significant impact on the surrender rate of both products. Meanwhile, interest rate had an insignificant link with the surrender rate of both products. This outcome is in agreement with several past studies that reported no real relationship between interest rate and surrender rate; thus disregarding the infamous interest rate hypothesis. Lastly, Gross Domestic Product (GDP) displayed an insignificant correlation with the surrender rate of both products. By using Pool OLS model, the trend for ordinary life product decreased in 2020 for all Takaful operators. As for investment linked products, a decreasing trend was noted from 2019 to 2020; the lowest and the highest forecast rates in 2019 were ascribed to Takaful Ikhlas and Takaful Malaysia, respectively.

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Section: Literature Reviewmentioning

confidence: 99%

Lapsation Risk: Takaful Operators In Malaysia

Nurul Hazwany Shamsuddin,

Siti Aida Sheikh Hussin,

Zalina Zahid

et al. 2023

AMCI

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A spatial machine learning model for analysing customers’ lapse behaviour in life insurance

O’Hagan

Sweeney

et al. 2020

Ann. actuar. sci.

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Spatial analysis ranges from simple univariate descriptive statistics to complex multivariate analyses and is typically used to investigate spatial patterns or to identify spatially linked consumer behaviours in insurance. This paper investigates if the incorporation of publicly available spatially linked demographic census data at population level is useful in modelling customers’ lapse behaviour (i.e. stopping payment of premiums) in life insurance policies, based on data provided by an insurance company in Ireland. From the insurance company’s perspective, identifying and assessing such lapsing risks in advance permit engagement to prevent such incidents, saving money by re-evaluating customer acquisition channels and improving capital reserve calculation and preparation. Incorporating spatial analysis in lapse modelling is expected to improve lapse prediction. Therefore, a hybrid approach to lapse prediction is proposed – spatial clustering using census data is used to reveal the underlying spatial structure of customers of the Irish life insurer, in conjunction with traditional statistical models for lapse prediction based on the company data. The primary contribution of this work is to consider the spatial characteristics of customers for life insurance lapse behaviour, via the integration of reliable government provided census demographics, which has not been considered previously in actuarial literature. Company decision-makers can use the insights gleaned from this analysis to identify customer subsets to target with personalized promotions to reduce lapse rates, and to reduce overall company risk.

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Household risk strategies during a pandemic – experiences from the 1918 influenza pandemic

Andersson

Eriksson

2021

Scandinavian Economic History Review

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Managing policy lapse risk in Sweden’s life insurance market between 1915 and 1947

Cited by 4 publications

References 20 publications

Lapsation Risk: Takaful Operators In Malaysia

Lapsation Risk: Takaful Operators In Malaysia

A spatial machine learning model for analysing customers’ lapse behaviour in life insurance

Household risk strategies during a pandemic – experiences from the 1918 influenza pandemic

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