Life insurance policies assist individuals maintain the
value of their money and build savings to be used in the future. However in
times of crisis their attitude may change. On one hand, they have an interest
in keeping their policies, as they can be used to cover their future,
medium-term or long-term needs in case of retirement or death. On the other
hand, they may need the premium money or the accumulated savings to meet
short-term needs so they lapse or surrender them—when a surrender value exists.
A natural question is what are the drivers of the behavior of the insured? When
do they decide to stop them and when do they choose to maintain them? We use
linear regression to identify how certain main macroeconomic variables (Gross
Domestic Product (GDP) per capita growth, unemployment, inflation, short-term
and long term interest rates, and consumer confidence index) can explain the
behavior of the insured towards keeping or interrupting their life insurance
policy. We do that for pension savings (pure and plain vanilla endowment—including
pensions), term life, whole life and unit linked individual policies.
Eling, M. and Kiesenbauer, D. (2014) What Policy Features Determine Life Insurance Lapse? An Analysis of the German Market. The Journal of Risk and Insurance, 81, 241-269. https://doi.org/10.1111/j.1539-6975.2012.01504.x
Milhaud, X., Loisel, S. and Maume-Deschamps, V. (2011) Surrender Triggers in Life Insurance: What Main Features Affect the Surrender Behavior in a Classical Economic Context? Bulletin Francais d'Actuariat, 11, 5-48.