Us individual life persistency update - soa

A 2005 Report

U.S. INDIVIDUAL LIFE PERSISTENCY UPDATE

A JOINT STUDY SPONSORED BY LIMRA INTERNATIONAL AND THE SOCIETY OF ACTUARIES

Marianne Purushotham Product Research 860-285-7794

mpurushotham@

? 2005, LIMRA International, Inc.? 300 Day Hill Road, Windsor, Connecticut 06095-4761, U.S.A. 350 Bloor Street East, 2nd Floor, Toronto, Ontario M4W 3W8, Canada St. Martins House, 31-35 Clarendon Road, Watford WD17 1JA, United Kingdom 28 Wattle Valley Road, Canterbury, Melbourne VIC 3126, Australia China Merchants Tower, Suite 917, 161 Lu Jia Zui East Road, Pudong, Shanghai 200120, China

This publication is a benefit of LIMRA International and the Society of Actuaries membership. No part may be shared with other organizations or reproduced in any form without LIMRA and the Society of Actuaries' written permission.

007108-0306-30-B94

Printed in U.S.A.

CONTENTS

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EXECUTIVE SUMMARY .................................................................................................. 7

RECOMMENDATIONS ..................................................................................................... 9

METHODOLOGY........................................................................................................... 10

SAMPLE DESCRIPTION................................................................................................. 11

OVERALL RESULTS ..................................................................................................... 12

WHOLE LIFE INSURANCE ............................................................................................ 14 Gender......................................................................................................................... 16 Issue Age..................................................................................................................... 16 Attained Age ............................................................................................................... 17 Premium Payment Mode............................................................................................. 18 Risk Class ................................................................................................................... 18 Smoking Status ........................................................................................................... 19 Underwriting Method.................................................................................................. 20 Single Premium Whole Life ....................................................................................... 21

TERM LIFE INSURANCE ............................................................................................... 23 Gender......................................................................................................................... 25 Issue Age..................................................................................................................... 25 Attained Age ............................................................................................................... 26 Premium Payment Mode............................................................................................. 27 Risk Class ................................................................................................................... 27 Smoking Status ........................................................................................................... 28 Underwriting Method.................................................................................................. 29

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UNIVERSAL LIFE INSURANCE...................................................................................... 30 Gender......................................................................................................................... 32 Issue Age..................................................................................................................... 33 Attained Age ............................................................................................................... 34 Risk Class ................................................................................................................... 34 Smoking Status ........................................................................................................... 35 Underwriting Method.................................................................................................. 35 Death Benefit Option .................................................................................................. 36

VARIABLE UNIVERSAL LIFE INSURANCE .................................................................... 37 Gender......................................................................................................................... 39 Issue Age..................................................................................................................... 40 Attained Age ............................................................................................................... 40 Risk Class ................................................................................................................... 41 Smoking Status ........................................................................................................... 41

PREMIUM PERSISTENCY EXPERIENCE FOR FLEXIBLE PREMIUM PRODUCTS............ 42 Premium Payment Ratio ............................................................................................. 42 Excess Premium Ratio ................................................................................................ 44 Total Premium Collection Growth Ratio .................................................................... 46

PARTICIPATING COMPANIES....................................................................................... 47

RELATED LINKS .......................................................................................................... 48

FIGURES AND TABLES

Page

Figure 1 Individual Life Policy Lapse Rates ....................................................................12 Figure 2 Individual Life Face Amount Lapse Rates.........................................................13 Figure 3 Individual Life versus Individual Disability and Long-Term Care

Insurance Lapse Experience..............................................................................13 Figure 4 Whole Life Policy Lapse Rates..........................................................................14 Figure 5 Whole Life Face Amount Lapse Rates ..............................................................15 Figure 6 Whole Life Lapse Rates by Policy Size.............................................................15 Figure 7 Whole Life Policy Lapse Rates by Gender ........................................................16 Figure 8 Whole Life Policy Lapse Rates by Issue Age Group.........................................17 Figure 9 Whole Life Policy Lapse Rates by Attained Age Group ...................................17 Figure 10 Whole Life Policy Lapse Rates by Premium Payment Mode..........................18 Figure 11 Whole Life Policy Lapse Rates by Risk Class.................................................19 Figure 12 Whole Life Policy Lapse Rates by Smoking Status.........................................19 Figure 13 Whole Life Policy Lapse Rates by Underwriting Method...............................20 Figure 14 Single Premium Whole Life Policy Lapse Rates .............................................21 Figure 15 Single Premium Whole Life Face Amount Lapse Rates..................................21 Figure 16 Single Premium Whole Life Policy Lapse Rates by Gender ...........................22 Figure 17 Single Premium Whole Life Face Amount Lapse Rates by Gender................22 Figure 18 Term Life Policy Lapse Rates..........................................................................24 Figure 19 Term Life Face Amount Lapse Rates ..............................................................24 Figure 20 Term Life Policy Lapse Rates by Gender ........................................................25 Figure 21 Term Life Policy Lapse Rates by Issue Age Group.........................................26 Figure 22 Term Life Policy Lapse Rates by Attained Age Group ...................................26 Figure 23 Term Life Policy Lapse Rates by Premium Payment Mode............................27

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Figure 24 Term Life Policy Lapse Rates by Risk Classification .....................................28 Figure 25 Term Life Policy Lapse Rates by Smoking Status...........................................28 Figure 26 Term Life Policy Lapse Rates by Underwriting Method.................................29 Figure 27 Universal Life Policy Lapse Rates...................................................................31 Figure 28 Universal Life Face Amount Lapse Rates .......................................................31 Figure 29 Universal Life Lapse Rates by Policy Size ......................................................32 Figure 30 Universal Life Policy Lapse Rates by Gender .................................................32 Figure 31 Universal Life Face Amount Lapse Rates by Gender......................................33 Figure 32 Universal Life Policy Lapse Rates by Issue Age Group..................................33 Figure 33 Universal Life Policy Lapse Rates by Attained Age Group ............................34 Figure 34 Universal Life Policy Lapse Rates by Risk Class ............................................34 Figure 35 Universal Life Policy Lapse Rates by Smoking Status....................................35 Figure 36 Universal Life Policy Lapse Rates by Underwriting Method ..........................35 Figure 37 Universal Life Policy Lapse Rates by Death Benefit Option...........................36 Figure 38 Universal Life Face Amount Lapse Rates by Death Benefit Option ...............36 Figure 39 Variable Universal Life Policy Lapse Rates ....................................................38 Figure 40 Variable Universal Life Face Amount Lapse Rates.........................................38 Figure 41 Variable Universal Life Policy Lapse Rates by Gender ..................................39 Figure 42 Variable Universal Life Face Amount Lapse Rates by Gender .......................39 Figure 43 Variable Universal Life Policy Lapse Rates by Issue Age Group ...................40 Figure 44 Variable Universal Life Policy Lapse Rates by Attained Age Group..............40 Figure 45 Variable Universal Life Policy Lapse Rates by Underwriting Class ...............41 Figure 46 Variable Universal Life Policy Lapse Rates by Smoking Status .....................41 Figure 47 Premium Payment Ratios.................................................................................43 Figure 48 Premium Payment Ratios -- Males versus Females........................................43 Figure 49 Premium Payment Ratios -- By Issue Age Group ..........................................44

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Figure 50 Excess Premium Ratios....................................................................................45 Figure 51 Excess Premium Ratios -- By Issue Age Group .............................................45 Figure 52 Total Premium Collection Growth Ratios........................................................46 Figure 53 Total Premium Collection Growth Ratios -- By Issue Age Group .................46

? ? ? ? ?

Table 1 Study Sample -- Number of Policies..................................................................11 Table 2 Study Sample -- Face Amount ...........................................................................11 Table 3 Whole Life Coverage Activity Reported During the Observation Period...........14 Table 4 Term Life Coverage Activity Reported During the Observation Period.............23 Table 5 Universal Life Coverage Activity Reported During

the Observation Period .......................................................................................30 Table 6 Variable Universal Life Coverage Activity Reported During

Observation Period .............................................................................................37

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