Assessment of the impact of client and product characteristics on the status of a life insurance contract: a case study of life insurance companies

Abstract

The study is about the impact of client characteristics (Age and Gender) and product characteristics (Frequency of payment and Product type) on the status of a life insurance contract (Lapsed or Active) The Topic of the study is “Assessment of the Client and Product Characteristics on the status of a Life Insurance Contract” with the major objective as “To investigate the factors contributing to the status of a policy for life insurance products”. The Specific Objectives of the study are as listed below. • To analyze the impact of age to the status of a policy for life insurance. • To analyze the impact of gender to the status of a policy for life insurance. • To analyze the impact of the frequency of payment to the status of a policy for life insurance. • To analyze the impact of the product type to the status of a policy for life insurance Data was obtained from one of the leading Life insurers’ in Uganda, the same was analyzed with R studio on three levels i.e. Univariate, Bivariate and Multivariate. Under Univariate analysis, Summary statistics was used as a tool to describe the Non-Categorical variable (Age of the client) and a frequency table was used to describe each of the categorical variables which include Contract Status, Gender, Mode of payment and type of the product. At the Bivariate level of analysis, a chi square statistic was used to test dependence between Contract status and each of the categorical variables while an analysis of variance (ANOVA) statistic was applied to test Equality of mean age between two categories of contract status. At the Multivariate level of analysis, generalized linear models with Probit regression were applied. Contract status being the dependent variable and the rest of the variables as independent variables. Due to the Scarcity and incompleteness of such data, only Gender was found to have a significant impact on policy lapses. There was not enough data to conclude on the impact of other factors under study like Product type, age and mode of payment on policy lapse. ix High lapse rate remains a key issue for the life insurance industry. Most insurers have some form of a retention program in place, but the upward trending nature of lapse rates suggests that these programs have had limited effect with most of the efforts focused on firefighting and containing the damage. Much as the data used in this research wasn’t comprehensive, I believe it will give direction to further research and insight on what category of factors to prioritize. With this Data, I managed to conclude that female clients are most likely to have their life Insurance Contracts Lapsed, and recommended as below. • A successful product launch should be followed by figuring out how to keep consumers around. • Insurers should develop more sustainable business models that effectively engages customers and adapts to their changing needs. • Insurers should recognize the need for adequately preparing the sales teams before they are released to the market as these are the gatekeepers to clients • Insurers should have a culture that appreciates the importance of retention • Lastly much broader Lapse analysis framework should be used for diagnosis