A longitudinal framework for lapse management in life insurance

Developing an informed lapse management strategy (LMS) is critical for life insurers to improve their profitability, and gain insight into the risk of their global portfolio. When designing a retention campaign, prior research in actuarial science (see Loisel et al. (2021); Valla et al. (2023)) has shown that targeting policyholders by maximizing their individual Customer Lifetime Value is more advantageous and informative for the insurer than targeting all those who are likely to lapse. However, most existing lapse analyses are not taking advantage of the fact that features and targets may vary over time. We propose to define a longitudinal LMS framework, that provides time-informed insights and leads to increased precision in targeting. The strengths and flaws of this new methodology are discussed in various settings. This paper contributes to the field of lapse analysis for life insurers and highlights the importance of using the complete past trajectory of policyholders, which is often available in insurers' information systems but has yet to be exploited.