Author(s)

Thomas Poufinas^1*, Gina Michaelide²

¹Department of Economics, Democritus University of Thrace, Komotini, Greece.
²Graduate Program in Business Mathematics, Athens University of Economics and Business & University of Athens, Athens, Greece.

Life insurance policies assist individuals maintain the value of their money and build savings to be used in the future. However in times of crisis their attitude may change. On one hand, they have an interest in keeping their policies, as they can be used to cover their future, medium-term or long-term needs in case of retirement or death. On the other hand, they may need the premium money or the accumulated savings to meet short-term needs so they lapse or surrender them—when a surrender value exists. A natural question is what are the drivers of the behavior of the insured? When do they decide to stop them and when do they choose to maintain them? We use linear regression to identify how certain main macroeconomic variables (Gross Domestic Product (GDP) per capita growth, unemployment, inflation, short-term and long term interest rates, and consumer confidence index) can explain the behavior of the insured towards keeping or interrupting their life insurance policy. We do that for pension savings (pure and plain vanilla endowment—including pensions), term life, whole life and unit linked individual policies.

Policyholder Behavior, Insurance Policy, Lapses, Surrenders, Macroeconomic Figures

Poufinas, T. and Michaelide, G. (2018) Determinants of Life Insurance Policy Surrenders. Modern Economy, 9, 1400-1422. doi: 10.4236/me.2018.98089.