The determinants of lapse rates in the Italian life insurance market

We investigate the drivers of lapses in life insurance contracts of a large Italian insurance company. We consider both traditional (with profit or participating) and unit-linked policies. We develop two different types of analyses. First of all, we investigate the determinants of lapse decisions by...

Full description

Saved in:
Bibliographic Details
Published in:European actuarial journal 2020-06, Vol.10 (1), p.149-178
Main Authors: Barucci, Emilio, Colozza, Tommaso, Marazzina, Daniele, Rroji, Edit
Format: Article
Language:English
Subjects:
Actuarial science
Applications of Mathematics
Datasets
Economics
Financial Services
Game Theory
Hypotheses
Insurance premiums
Interest rates
Life insurance
Mathematics
Mathematics and Statistics
Original Research Paper
Policyholders
Quantitative Finance
Social and Behav. Sciences
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:We investigate the drivers of lapses in life insurance contracts of a large Italian insurance company. We consider both traditional (with profit or participating) and unit-linked policies. We develop two different types of analyses. First of all, we investigate the determinants of lapse decisions by policyholders looking at microdata on each contract and some macroeconomic variables. Then, through a panel study, we investigate the role of macroeconomic variables on lapses at the regional level. We observe that policy features affecting lapses of the two types of contracts are quite different. Only for the contracts stipulated few years before, we find weak evidence supporting the Interest Rate Hypothesis, i.e. a positive correlation between interest and lapse rates. Instead, there is some positive evidence that lapse rates are positively related to personal financial/economic difficulties (emergency fund hypothesis).
ISSN:2190-9733
2190-9741
DOI:10.1007/s13385-020-00227-0