The SOA’s Product Development Section Council and Committee on Life Insurance Research engaged RGA to research the magnitude and impact of the “shock lapse” at the end of the level premium period. This has become an extremely important assumption both for new business pricing and for modeling in-force business. As a result, we have tried to develop a comprehensive and highly relevant industry study of post-level term assumptions, practices and experience results.
The project was broken into two phases:
- Phase 1 was a survey of the mortality and lapse assumptions used by actuaries for pricing and modeling term products.
- Phase 2 was a study of mortality and lapse experience from companies with term policies beyond the end of the level period.
This article will summarize the results from the Phase 1 Survey. Responses were received from 41 companies responsible for approximately 63 percent of 2008 term sales. The survey questions asked companies to describe pricing assumptions and product design characteristics for their term products issued as of the end of 2008.