Surrender triggers in life insurance: what main features affect the surrender behavior in a classical economic context?

This paper shows that some policy features are crucial to explain the decision of the policyholder to surrender her contract. We point it out by applying two segmentation models to a life insurance portfolio: the Logistic Regression model and the Classification And Regression Trees model. Protection as well as Savings lines of business are impacted, and results clearly explicit that the profit benefit option is highly discrimi- nant. We develop the study with endowment products. First we present the models and discuss their assumptions and limits. Then we test different policy features and policyholder's characteristics to be lapse triggers so as to segment a portfolio in risk classes regarding the surrender choice : duration and profit benefit option are essential. Finally, we explore the main dfferences of both models in terms of operational results.