Term Life: Understanding Post-Level Experience

The life insurance industry is beginning to experience the effects of the so-called “shock lapse” as level-premium term products transition into their post-level periods. To understand the mortality implications of these extreme lapse scenarios, it seems appropriate to review the selective lapsation theory presented in the ground-breaking 1980 article “Pricing a Select and Ultimate Renewable Term Product,” by Jeffery Dukes and Andrew MacDonald. This will provide good context for analyzing emerging post-level lapse and mortality experience.

http://www.transamericareinsurance.com/Media/media_associateArticle.aspx...