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Effect of Premium Payment Frequency on Life Insurance Persistency

Abstract

The study examines the effect of premium payment frequency on life insurance persistency, focusing on how the frequency with which policyholders pay their premiums may influence their ability and willingness to maintain insurance policies over time. Premium payment frequency is an important feature of life insurance contracts because policyholders may make payments monthly, quarterly, semi-annually, or annually. Understanding how these payment arrangements affect policy continuation is essential for insurers seeking to improve policy retention, maintain stable premium income, and reduce policy lapses. The study will investigate the relationship between premium payment frequency and life insurance persistency by comparing policyholders who adopt different premium payment schedules. It will examine whether payment frequency is associated with differences in policy renewal, lapse rates, duration of coverage, and continuation of premium payments. The study will also consider how payment arrangements may influence policyholders' ability to sustain their insurance commitments over extended periods. Particular attention will be given to monthly, quarterly, semi-annual, and annual premium payment arrangements. Actuarial and statistical techniques will be used to assess persistency patterns across the different payment frequencies. Measures such as policy duration, renewal rates, lapse rates, premium continuity, and policy termination will be examined to determine how payment frequency may influence the stability of life insurance portfolios. A quantitative research approach will be adopted for the study. Relevant life insurance policy records, premium payment information, policy duration, renewal records, and lapse experience will be analysed using descriptive and inferential statistical techniques. Persistency rates will be estimated across different premium payment frequencies, while comparative analysis and probability-based methods will be used to assess variations in policy continuation patterns. The study is expected to reveal that premium payment frequency has an important effect on life insurance persistency. Policies with more frequent payment arrangements may exhibit different continuation and lapse patterns compared with policies involving less frequent payments. The findings are also expected to indicate that payment frequency may influence the ability of policyholders to maintain regular premium commitments, thereby affecting the duration and stability of insurance coverage. The findings are expected to have important implications for life insurance pricing, product design, premium collection strategies, customer retention, and portfolio management. A better understanding of the relationship between payment frequency and persistency may enable insurers to design payment structures that encourage continued policy participation. It may also assist insurers in identifying payment patterns associated with higher lapse risks and developing appropriate measures to improve policy retention. The study concludes that premium payment frequency is an important consideration in understanding life insurance persistency and policyholder retention. Differences in payment schedules may influence the continuity of premium payments and the likelihood that policies remain active over time. It is therefore recommended that insurers regularly analyse persistency across different payment frequencies, provide flexible payment arrangements where appropriate, and incorporate payment frequency patterns into actuarial analysis and life insurance portfolio management.

Keywords: Premium Payment Frequency, Life Insurance Persistency, Policy Persistency, Premium Payments, Policy Lapse, Policy Renewal, Policyholder Retention, Life Insurance, Insurance Premiums, Actuarial Analysis, Policy Duration, Insurance Portfolio, Customer Retention, Persistency Rates, Insurance Risk.