Accurately estimated anti-selection for customers converting from ‘Term’ to ‘Perm’ products
Case Studies / Insurance / Understand and Manage Mortality Risk
Anti-selection is likely to occur when customers seek to convert to a permanent life insurance product due to an increase in risk factors. The insurer will miscalculate risk if they do not factor in anti-selection effects and/or its levels.
Our goal was to give the insurance carrier an accurate understanding of anti-selection (which segments and how much) to help target term conversion efforts, as well as set expectations and reserve appropriately.
We used a combination of data science techniques (e.g., Bayesian inference, MCMC, survival analysis, etc.) to identify level of anti-selection using variables like conversion time and product type.
We provided the client with an anti-selection factor for individual segments based on several variables. We were able to improve the identification of anti-selection cases and estimate their effect on term payouts.