Of these, the two most troublesome for LTCi carriers are interest and lapse rates
single contract) rather than aggregate lapse rate
Interest in lapse rate
determinants has become more prominent in recent years as some financial service firms have applied securitization techniques to life insurance policies held by individuals.
The lapse rate
increases when the portfolio is set in a runoff position, and falls thereafter.
There can be a wide range of premium levels and associated shock lapse rate
assumptions that produce roughly the same amount of total profit.
Although the former approach allows for some form of irrationality in lapsing a policy by introducing a minimal lapse rate
in each state of the economy, the latter approach identifies a boundary that separates those states of the economy in which it is convenient to sell back the policy from those in which it is convenient to keep holding it.
The affirmation of the ratings reflects Fidelity Life's strong risk-adjusted capitalization, consistent profitability as well as its improving lapse rates
and experience profits.
The success of that strategy shows up in Thrivent's low lapse rate
, even though the company's average contract size is smaller than the industry's average, Boushek said.
Partially offsetting these positive rating factors include ongoing competitive pressures, the company's relatively high lapse rate
and the potentially higher claims ratios of the new business lines.
And while stand-alone long-term care insurance is more profitable when lapse rates
are higher, annuities are more profitable when the lapse rate
is lower, said Friedrich.
To correspond with this figure, for untested women, a constant lapse rate
Their profits increase if the ultimate duration lapse rate