Author information:
László Szepesváry: Magyar Posta Életbiztosító Zrt., Chief Actuary; Corvinus University of Budapest, PhD student. E-mail: szepesvary.laszlo@mpb.hu
Abstract:
This study examines the lapse rates of certain life insurances in relation to various economic and non-economic events, analysing empirical insurance data, in search of answers to the questions of what impact the changed yield and inflation environments and lockdowns due to Covid-19 had on the cancellation of contracts, and how sensitive policyholders are to changes in yields in the case of certain investment-type insurances. In addition to the conclusions drawn on the basis of time series data, further statistical analyses (such as Granger causality testing, contract classification with k-means clustering) contribute to a more complete picture. The effect of certain changes in the interest rate level on lapses can be detected in the case of the single premium investment-type insurance under review (especially for the higher premium classes). No similar behaviour is typical of the current premium insurances under review, and so far it has also not been possible to detect any significant relationship with lapses in connection with inflation or the lockdowns due to Covid-19.
Cite as (APA):
Szepesváry, L. (2022). Effect of the Yield Level, the Inflation Environment and the Pandemic on the Lapse Rates of Life Insurances. Financial and Economic Review, 21(3), 44–72. https://doi.org/10.33893/FER.21.3.44
Column:
Study
Journal of Economic Literature (JEL) codes:
G22, C32, C58, E43
Keywords:
life insurance, lapse rate, yield environment, inflation, Covid-19, time series analysis
References:
Ábel, I. – Lóga, M. – Nagy, Gy. – Vadkerti, Á. (2019): Lifting the Veil on Interest. Financial and Economic Review, 18(3): 29–51. https://doi.org/10.33893/FER.18.3.2951
Banyár, J. (2016): Életbiztosítás (Life insurance) (2nd revised, enlarged edition). Corvinus University of Budapest, Budapest.
Balogh, A. (2021): What Causes Inflation? – The Relationship between Central Bank Policies and Inflation. Financial and Economic Review, 20(4): 144–156. https://en-hitelintezetiszemle.mnb.hu/letoltes/fer-20-4-fa1-balogh.pdf
Barsotti, F. – Milhaud, X. – Salhi, Y. (2016): Lapse risk in life insurance: Correlation and contagion effects among policyholders’ behaviors. Insurance: Mathematics and Economics, 71(November): 317–331. https://doi.org/10.1016/j.insmatheco.2016.09.008
Campbell, J. – Chan, M. – Li, K. – Lombardi, L. – Lombardi, L. – Purushotham, M –, Rao, A. (2014): Modeling of Policyholder Behaviour for Life Insurance and Annuity Products. A survey and literature review. Society of Actuaries. https://www.soa.org/Files/Research/Projects/research-2014-modeling-policy.pdf. Downloaded: 15 January 2022
Csépai, O. – Kovács, E. (2021): Koronavírus-járvány adatok és biztosítási hatások elemzése (Analysis of Covid19 pandemic data and insurance effects). Biztosítás és Kockázat (Insurance and Risk) 8(3–4): 24–43. https://doi.org/10.18530/BK.2021.3-4.24
G. Szabó, A. – Nagy, K. (2021): Situation and Financing Capacity of the Hungarian Insurance Market. Financial and Economic Review, 20(4): 170–179. https://en-hitelintezetiszemle.mnb.hu/letoltes/fer-20-4-fa3-szabo-nagy.pdf
Fisher, L.D. – Lin, D.Y. (1999): Time-dependent covariates in the Cox proportional-hazards regression model. Annual Review of Public Health, 20: 145–157. https://doi.org/10.1146/annurev.publhealth.20.1.145
Grosen, A. – Jorgensen, P.L. (2000): Fair valuation of life insurance liabilities: The impact of interest rate guarantees, surrender options, and bonus policies. Insurance: Mathematics and Economics, 26(1): 37–57. https://doi.org/10.1016/S0167-6687(99)00041-4
Hanák, G. (2001): Törléshányadok (Lapse rates). In: Horváth, Gy. (ed.): Aktuáriusi esettanulmányok, Aktuáriusi Jegyzetek 11. kötet. (Actuarial case studies, Actuarial Notes Vol. 11). Budapest University of Economic Sciences and Public Administration, Budapest.
Janecek, M. (2012): Valuation Techniques of Life Insurance Liabilities: Valuation Techniques and Formula Derivation. LAP LAMBERT Academic Publishing.
Kim, C. (2005): Modeling Surrender and Lapse Rates With Economic Variables. North American Actuarial Journal, 9(4): 56–70. https://doi.org/10.1080/10920277.2005.10596225
Kirchgässner, G. – Wolters, J. – Hassler, U. (2013): Introduction to Modern Time Series Analysis. Springer. https://doi.org/10.1007/978-3-642-33436-8
Kovács, E. (2011): Pénzügyi adatok statisztikai elemzése (Statistical analysis of financial data). Tanszék Kft., Budapest.
Kovács, E. (2021): Másképp hat a járvány, mint a gazdasági válságok? (Does a pandemic work differently from an economic crisis?). Liebowitz, J. (ed.): The Business of Pandemics. The COVID-19 Story. Közgazdasági Szemle (Economic Review), 68(11): 1231–1240. https://doi.org/10.18414/KSZ.2021.11.1231
Kovács, L. – Nagy, E. (2022): A hazai pénzügyi kultúra fejlesztésének aktuális feladatai (Topical issues of improving financial culture in Hungary). Gazdaság és Pénzügy (Economy and Finance), 9(1): 2–19. https://doi.org/10.33926/GP.2022.1.1
Lambert, G. (2020): Az Insurance Europe felmérése tíz európai ország lakosságának nyugdíjcélú megtakarításairól (Insurance Europe pension survey of 10 EU member countries). Biztosítás és Kockázat (Insurance and Risk), 7(3–4): 102–112. https://doi.org/10.18530/BK.2020.3-4.102
Milhaud, X. – Loisel, S. – Maume-Deschamps, V. (2011): Surrender triggers in life insurance: what main features affect the surrender behavior in a classical economic context? Bulletin Français d’Actuariat, Institut des Actuaires, 11(22): 5–48. https://hal.archives-ouvertes.fr/hal-00450003/document/. Downloaded: 14 March 2022.
Németh-Lékó, A. (2020): Pénzügyi tudatosság fejlesztése az öngondoskodási szemlélet erősítéséért (Development of financial awareness to strengthen the attitude of self-reliance). Biztosítás és Kockázat (Insurance and Risk), 7(3–4): 90–101. https://doi.org/10.18530/BK.2020.3-4.90
Poufinas, T. – Michaelide, G. (2018): Determinants of Life Insurance Policy Surrenders. Modern Economy, 9(8): 1400–1422. https://doi.org/10.4236/me.2018.98089
Russell, D.T. – Fier, S.G. – Carson, J.M. – Dumm, R.E. (2013): An Empirical Analysis of Life Insurance Policy Surrender Activity. Journal of Insurance Issues, 36(1): 35–57. http://www.jstor.org/stable/41946336
Szepesváry, L. (2015): Dinamikus modellek alkalmazása életbiztosítások cash flow előrejelzésére (Application of dynamic models for the cash flow forecasting of life insurances). In: Tavaszi szél 2015 Konferenciakötet II. kötet (Spring Wind 2015, Conference volume, Vol 2.): pp. 581–599. Líceum Kiadó, Eger, Doktoranduszok Országos Szövetsége. http://publikacio.uni-eszterhazy.hu/15/1/Tavaszi Szél 2015 - 2. kötet.pdf. Downloaded: 1 February 2022.
Terták, E. (2022): Pénzügyi oktatás a világban (A Global View on Financial Education). Gazdaság és Pénzügy (Economy and Finance), 9(1): 20–49. https://doi.org/10.33926/GP.2022.1.2
Vékás, P. (2011): Túlélési modellek (Survival models). In: Kovács, E. (ed.): Pénzügyi adatok statisztikai elemzése (Statistical analysis of financial data). Tanszék Kft., Budapest, pp. 173–194.
Wooldridge, J.M. (2009): Introductory econometrics: a modern approach. 4th ed., South-Western Cengage Learning, Mason, USA.