Hi I just wanted to confirm my understanding of dynamic lapses. A lapse is the risk of a policy being cancelled/terminated due to non payment/surrendered. I think it could either be because of: - company/distributor behaviour/actions - e.g. poor customer service, misselling, poor value product compared to the rest of the market, etc. - policyholder behaviour unrelated to company actions - e.g. secondary impact of changes in the economy - affordability, change in inv performance of a product, value of guarantees, selective withdrawal. Where the second instance describes dynamic lapses. Is that correct? Thank you, Rachael
The term 'dynamic lapse' refers to modelling, whereby the lapse / surrender / withdrawal rates used within the model are programmed in such a way that they automatically vary according to other modelled factors, such as investment returns and the 'moneyness' of guarantees / options.
