EXOGENOUS AND ENDOGENOUS RISK FACTORS MANAGEMENT TO PREDICT SURRENDER BEHAVIOURS

Insurers have been concerned about surrenders for a long time especially in saving business, where huge sums are at stake. The emergence of the European directive Solvency II, which promotes the development of internal risk models (among which a complete unit is dedicated to surrender risk managemen...

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Bibliographic Details
Published in:ASTIN Bulletin : The Journal of the IAA 2013-09, Vol.43 (3), p.373-398
Main Author: Milhaud, Xavier
Format: Article
Language:English
Subjects:
Actuarial science
Mathematics
Statistics
Statistics Theory
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Summary:Insurers have been concerned about surrenders for a long time especially in saving business, where huge sums are at stake. The emergence of the European directive Solvency II, which promotes the development of internal risk models (among which a complete unit is dedicated to surrender risk management), strengthens the necessity to deeply study and understand this risk. In this paper, we investigate the topics of segmenting and modelling surrenders in order to better take into account the main risk factors impacting policyholders' decisions. We find that several complex aspects must be specifically dealt with to predict surrenders, in particular the heterogeneity of behaviour as well as the context faced by the insured. Combining them, we develop a new methodology that seems to provide good results on given business lines, and that moreover can be adapted for other products with little effort.
ISSN:0515-0361
1783-1350
DOI:10.1017/asb.2013.2