Insurance Persistency

Individual Life Persistency

HARTFORD MIAMI TORONTO LONDON KUALA LUMPUR SHANGHAI HO CHI MINH CITY SEOUL

300 Day Hill Road, Windsor, CT 06095, U.S.A.

Phone: 860-688-3358 • Fax: 860-298-9555 • Web: www.limra.com

© 2009, LIMRA®

This publication is a benefit of LIMRA membership. No part may be shared with

other organizations or reproduced in any form without LIMRA’s written permission.

008306-1209 (562-44-0-J34)

Full Report

Ingrid R. Goodenow, FLMIInternational Research

860.285.7835 [email protected]

Malaysia

A 2009 Report

INDIVIDUAL LIFE PERSISTENCY —

MALAYSIA

© 2009, LIMRA

300 Day Hill Road, Windsor, Connecticut 06095, U.S.A.

This publication is a benefit of LIMRA membership. No part may be shared with other organizations or

reproduced in any form without LIMRA’s written permission.

008306-1209-(562-44-0-J34) Printed in U.S.A.

CONTENTS

Page

INTRODUCTION .............................................................................................................. 5

KEY RESULTS ................................................................................................................ 6

INDIVIDUAL LIFE PERSISTENCY – MALAYSIA .............................................................. 7

CONSTANT GROUP TRENDS .......................................................................................... 9

TRENDS IN U.S. INDIVIDUAL LIFE PERSISTENCY ........................................................ 10

PARTICIPATING COMPANIES ....................................................................................... 12

RELATED LINKS .......................................................................................................... 13

FIGURES AND TABLES

Page

Figure 1 — Average Policy Lapse Rates by Years in Business .......................................... 8

Figure 2 — Average Face Amount Lapse Rates by Years in Business ............................... 8

Figure 3 — Trends in U.S. Individual Life Policy Lapse Rates ........................................ 10

Figure 4 — Trends in U.S. Individual Life Face Amount Lapse Rates ............................ 11

• • • • •

Table 1 — 2008 Average Policy and Face Amount Lapse Rates........................................ 7

Table 2 — Average Face Amounts: 2007 and 2008 In-Force Business

(in Ringgit Malaysia) .................................................................................................... 8

Table 3 — Average Policy Lapse Rates for a Constant Group of Companies .................... 9

Table 4 — Average Face Amount Lapse Rates for a Constant Group of Companies ........ 9

Individual Life Persistency — Malaysia

5

INTRODUCTION

LIMRA conducted the Individual Life Persistency Study to examine lapse experience on individual

life products in Malaysia. Nine companies participated in this research providing lapse data for 2008.

Lapse rates are summarized by the number of years participating companies have been in the

individual life insurance business. The results of this study can be used for industry benchmarking

and as a source of background information for the product development and planning process.

Companies were asked to provide data on all policies sold since beginning individual life insurance

operations.

An appendix is included for participating companies only showing individual company results using

confidential codes. This allows LIMRA to provide valuable company-by-company results while

maintaining the confidentiality of participants. If you would like to find out more about participating

in this study, please contact Ingrid Goodenow at [email protected].

Years in individual life business — Data is summarized by companies that have been in the

business for less than 10 years, and for 10 years or more.

Specific lapse rate calculations are as follows:

Policy Count = 100 x Number of policies lapsed during the policy year

(Number of policies at beginning of year + number of policies at year end) ÷ 2

Face Amount = 100 x Face amount lapsed during the policy year

(Face amount at beginning of year + face amount at year end) ÷ 2

mailto:[email protected]


6

KEY RESULTS

The average policy lapse rate for participating companies in 2008 was 7.0 percent.

Company tenure in the individual life business impacts both the policy and face amount lapse

rates. The average policy lapse rate for newer companies is 13.9 percent; almost three times higher

than that of established companies at 4.7 percent.

The average face amount lapse rate for 2008 participants was 4.3 percent.

Companies in the business for less than 10 years experienced a 5.5 percent face amount lapse rate.

Companies in the business 10 or more years saw 3.9 percent of their face amount lapse.

The average face amount per policy for 2008 remained fairly level at 50,833 Ringgit Malaysia.

The average policy lapse rate for a constant group of companies was unchanged at 7.4 percent for

2007 and 2008.


7

INDIVIDUAL LIFE PERSISTENCY – MALAYSIA

This study presents the lapse experience of individual life insurance policies. Aggregate averages for

all companies show a similar pattern. Comparing companies that are new to the individual life

business with the more established companies, both groups have higher lapse rates for policies than

for face amounts (Table 1).

On an individual company basis, the average policy lapse rate is higher than the face amount lapse

rate for eight of the nine participating companies. The rates of U.S. individual life persistency are

opposite that of Malaysia with face amount lapse rates slightly higher than policy lapse rates. This

implies that smaller policies with lower face amounts are lapsing in Malaysia and fewer policies with

larger face amounts are lapsing in the United States. Malaysian companies with 10 or more years in

the business are showing rates more in line with the United States, while those with less than

10 years’ tenure show quite a bit of volatility.

The number of years a company has been in the life business has an impact on both policy and face

amount lapse rates. This is due to the fact that higher lapse rates occur in the first few policy years.

The older the life business, the less influence the newer business has on the overall lapse rates. The

two highest rates for policy lapses come from companies that have been in the life business for fewer

than 10 years. With the exception of one company, policy lapse rates are higher than face amount

lapse rates, implying that most of the lapses are smaller face amount lapses.

Table 1 — 2008 Average Policy and

Face Amount Lapse Rates*

Policies Face Amount

Average+ 7.0% 4.3%

Less than 10 years 13.9 5.5

10 years or more 4.7 3.9

*Based on data from eight companies

+Company averages are equal to the mean of the individual company lapse rates.

Average individual life face amounts for all companies remained fairly level, going from 50,253

Ringgit Malaysia (RM) on December 31, 2007, to 50,833 (RM) on December 31, 2008. The

aggregate average face amounts of in-force business for companies in the business for 10 years or

more are nearly twice as large as those of companies with less than 10 years of service (Table 2).


8

Table 2 — Average Face Amounts:

2007 and 2008 In-Force Business

(in Ringgit Malaysia)

In-force on December 31, 2007

In-force on December 31, 2008

Average 50,253 50,833

Less than 10 years 31,878 32,680

10 years or more 59,441 59,910

Again, it’s clear to see the effect a company’s tenure in the life business has upon its lapse rates,

both for policies and face amounts. Companies with less than 10 years of service have average policy

lapse rates almost three times higher than established companies (Figure 1). This emphasizes the

vulnerability that a smaller block of in-force business has against lapses; particularly the number of

policies that commonly lapse in the first few years.

Figure 1 —

Average Policy Lapse Rates

by Years in Business*

Figure 2 —

Average Face Amount Lapse Rates

by Years in Business

*Based on data from eight companies

The aggregate average face amount lapse rate for companies in the life business less than 10 years is

5.5 percent (Figure 2). The spread in the aggregate face amount lapse rates for new versus

established companies is less than two percentage points.

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Less than10 years

10 yearsor more

13.9%

4.7%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

Less than10 years

10 yearsor more

5.5%

3.9%


9

CONSTANT GROUP TRENDS

One of the most comprehensive ways to view trend data is to compare a constant group of

companies. Seven Malaysian companies contributed data for the 2007 and 2008 persistency reports.

Results in comparing the two years were similar to 2008 results: Average policy lapse rates exceeded

face amount lapse rates.

Aggregate, average policy lapse rates were the same for this group of companies from 2007 to 2008

(Table 3). On an individual company basis, however, four of the seven companies had fewer policies

lapse in 2008, two companies saw their policy lapse rates increase, and one company experienced no

change in this period.

Table 3 — Average Policy Lapse Rates

for a Constant Group of Companies

2008 2007

Average* 7.4% 7.4%

*Company averages are equal to the mean of the individual company lapse rates.

More fluctuation was seen in the face amount lapse rates with only two companies seeing

improvement in their rates from 2007 to 2008 (Table 4). However, the improvements outweighed the

decreases with an end result of a slight improvement in the aggregate, average rate.

Table 4 — Average Face Amount Lapse Rates

for a Constant Group of Companies

2008 2007

Average* 4.3% 4.5%

*Company averages are equal to the mean of the individual company lapse rates.


10

TRENDS IN U.S. INDIVIDUAL LIFE PERSISTENCY

LIMRA has been measuring life persistency of U.S. insurers for over 90 years. More recently,

LIMRA and the Society of Actuaries (SOA) have partnered in doing a collaborative persistency

study in which individual policy data is collected, rather than aggregated company results.

The most recent U.S. Individual Life Insurance Persistency Study, conducted jointly by LIMRA

International and the SOA, presents results of the individual life insurance lapse experience for

observation years 2004 and 2005. This study shows results for individual policy years rather than for

a total block of in-force business (Figure 3). Thirty-nine individual life insurance writers contributed

data for whole life, term, universal life, and variable universal life insurance plans for this study.

Over time, it is hoped that with increased participation from Malaysian companies LIMRA can build

a database and have similar trend data to present to participating companies.

U.S. lapse rates are calculated as follows:

Annualized policy lapse rate = 100 x Number of policies lapsed during the year

Number of policies exposed to lapse during the year

The overall, average policy lapse rate for contributing U.S. companies dropped slightly from

4.7 percent in the prior study to 4.3 percent.

Figure 3 — Trends in U.S. Individual Life

Policy Lapse Rates

0%

2%

4%

6%

8%

10%

12%

1 2 3 4 5 6-10 11-20 21+

Lap

se R

ate

Policy Year

2004-2005 2003-2004 2001-2002 1994-1996


11

The overall, average face amount lapse rate for U.S. companies also decreased slightly during the

2004 and 2005 observation period averaging around 5.2 percent versus 5.7 percent in the prior

period.

Figure 4 — Trends in U.S. Individual Life

Face Amount Lapse Rates

0%

2%

4%

6%

8%

10%

12%

14%

16%

1 2 3 4 5 6-10 11-20 21+

Lap

se R

ate

Policy Year

2004-2005 2003-2004 2001-2002 1994-1996


12

PARTICIPATING COMPANIES

Allianz Life Insurance

American International Assurance

Great Eastern Life Assurance

Hong Leong Assurance

Malaysian Assurance Alliance

MAA Takaful

Prudential Malaysia

TM Asia Life

Uni.Asia Life Assurance


13

RELATED LINKS

The following links are valid as of November 20, 2009.

LIMRA

U.S. Individual Life Insurance Persistency (2009)

This report presents the results of the most recent study of individual life insurance lapse experience

in the United States conducted jointly by LIMRA International and the Society of Actuaries (SOA).

The observation period for the study is calendar years 2004 and 2005, based on data provided by

38 individual life insurance writers. This study presents lapse experience for whole life, term life,

universal life and variable universal life plans issued between 1901 and 2005.

http://www.limra.com/abstracts/abstract.aspx?fid=10127

U.S. Annuity Persistency (2009, 2nd quarter)

This quarterly survey tracks both contract and cash value annuity persistency. It measures surrender

rates in total and by all combinations of market, product type, distribution channel, and presence of

surrender charge.


Simplified Issue Marketplace (2009)

Simplified issue life insurance covers a broad range of individual life insurance products and

markets. This study includes product design and underwriting, target markets, sales results, current

quotes, and a quick look at the strategic outlook and challenges of the individual life simplified issue

market. Twenty-nine companies participated.


Chile Individual Life Buyer Study (2009)

The Individual Life Buyer Study provides a general overview of who is purchasing life insurance and

the types of life insurance products they are buying.





Individual Life Persistency

HARTFORD MIAMI TORONTO LONDON KUALA LUMPUR SHANGHAI HO CHI MINH CITY SEOUL

300 Day Hill Road, Windsor, CT 06095, U.S.A.

Phone: 860-688-3358 • Fax: 860-298-9555 • Web: www.limra.com

© 2009, LIMRA®

This publication is a benefit of LIMRA membership. No part may be shared with

other organizations or reproduced in any form without LIMRA’s written permission.

008306-1209 (562-44-0-J34)

Full Report

Ingrid R. Goodenow, FLMIInternational Research

860.285.7835 [email protected]

Malaysia

Insurance Persistency

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