Variable annuity dynamic lapse study: A data mining approach

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By Peter H. Sun | 17 June 2011

Dynamic lapse behavior is an important factor in variable annuity (VA) pricing and valuation. A company can regularly collect lapse data to form the basis for data mining, which can lead to fundamental insights on policy lapse behavior.

This paper describes the principles of data mining, using a realistic illustrative example, and explores the issues of data credibility, relevance, and formula fitting.