I have a question about The following excerpt from the SP1 notes on persistency monitoring:
For each homogeneous group being analysed, lapse rates can be determined as follows. Determine:
(a) the number of contracts issued in the company’s last financial year
(b) the number of contracts issued in the company’s last financial year that survive in-force until the first policy anniversary.
(a) divided by (b) provides the first-year persistency rate. The first-year lapse rate is determined by (1 – first-year persistency rate).
Reference: SP1 Combined Materials Pack for exams in 2023, Page 997, Chapter 29, section 3.7
I believe that this is incorrect, and that instead persistency is calcualted as (b) over (a), i.e.
Persistency rate = (number of surviving policies) / (number of written policies)
If this is incorrect, then the notes should be updated.
Thanks,
Ross
