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Analysis of Policyholder Lapse Rates Across Different Life Insurance Products

Abstract

Policyholder lapse is an important consideration in life insurance because the termination of policies before their expected maturity can affect premium income, profitability, cash flow, and the long-term stability of insurance portfolios. Lapse rates may vary across different life insurance products due to differences in policy duration, premium structure, benefits, affordability, and policyholder characteristics. Analysing these variations is therefore important for insurers seeking to understand policy persistency and manage the financial consequences associated with policy lapses. The study will analyse policyholder lapse rates across different life insurance products and examine the extent to which lapse experience differs among product categories. It will focus on identifying patterns in policy termination and comparing lapse rates across selected life insurance products. The study will also consider the distribution of lapse rates over different policy periods and assess the extent to which certain products experience relatively higher or lower levels of policyholder lapses. The analysis will examine factors such as policy duration, premium payment frequency, product type, and policy age in relation to observed lapse patterns. Appropriate statistical techniques will be used to compare lapse rates and identify significant differences across life insurance products. The study will also assess historical lapse experience to determine whether consistent patterns can be identified within individual product categories and across the overall life insurance portfolio. A quantitative research approach will be adopted for the study. Historical policyholder data containing information on policy status, product type, policy duration, premium payments, and lapses will be obtained and analysed using descriptive and inferential statistical techniques. Lapse rates will be calculated for the selected life insurance products and compared across relevant categories. Statistical tests may also be applied to determine whether observed differences in lapse rates are significant. The study is expected to reveal variations in policyholder lapse rates across different life insurance products. Some products may exhibit relatively higher lapse rates due to their premium structures, policy characteristics, or duration, while others may demonstrate stronger policy persistency. The findings may also reveal particular policy periods during which lapse rates are more pronounced, providing useful evidence for understanding the pattern of policyholder retention. The findings will be useful to life insurance companies, actuaries, underwriters, and insurance managers in improving policy persistency management and financial planning. Understanding differences in lapse rates can assist insurers in developing appropriate premium assumptions, estimating future cash flows, assessing profitability, and improving product design. The results may also support the development of strategies for identifying products with higher lapse exposure and strengthening policyholder retention. The study concludes that analysing policyholder lapse rates across different life insurance products is important for effective actuarial evaluation and insurance portfolio management. It is therefore recommended that insurers regularly monitor lapse experience by product type and policy duration, update actuarial assumptions using reliable historical data, and develop appropriate strategies for improving policy persistency. Continuous analysis of lapse patterns will help insurers improve financial projections and strengthen the sustainability of their life insurance portfolios.

Keywords: Policyholder Lapse, Lapse Rates, Life Insurance Products, Policy Persistency, Life Insurance, Insurance Portfolio, Policy Termination, Actuarial Analysis, Lapse Experience, Premium Income, Policy Duration, Insurance Profitability, Policyholder Retention, Life Insurance Valuation, Insurance Risk.