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Household, personal, and financial determinants of surrender in Korean health insurance
Communications for Statistical Applications and Methods 2021;28:447-462
Published online September 30, 2021
© 2021 Korean Statistical Society.

Hyunoo Shima, Jung Yeun Minb, Yang Ho Choi1,a

aDepartment of Actuarial Science, Hanyang University, Korea;
bDepartment of Finance and Insurance, Hanyang University, Korea
Correspondence to: 1 Department of Actuarial Science, Hanyang University-ERICA Campus, 55 Hanyangdaehak-ro, Sangnok-gu, Ansan, Gyeonggi-do 15588, Republic of Korea. E-mail: ychoi@hanyang.ac.kr
Received January 29, 2021; Revised March 22, 2021; Accepted April 21, 2021.
 Abstract
In insurance, the surrender rate is an important variable that threatens the sustainability of insurers and determines the profitability of the contract. Unlike other actuarial assumptions that determine the cash flow of an insurance contract, however, it is characterized by endogenous variables such as people’s economic, social, and subjective decisions. Therefore, a microscopic approach is required to identify and analyze the factors that determine the lapse rate. Specifically, micro-level characteristics including the individual, demographic, microeconomic, and household characteristics of policyholders are necessary for the analysis. In this study, we select panel survey data of Korean Retirement Income Study (KReIS) with many diverse dimensions to determine which variables have a decisive e ect on the lapse and apply the lasso regularized regression model to analyze it empirically. As the data contain many missing values, they are imputed using the random forest method. Among the household variables, we find that the non-existence of old dependents, the existence of young dependents, and employed family members increase the surrender rate. Among the individual variables, divorce, non-urban residential areas, apartment type of housing, non-ownership of homes, and bad relationship with siblings increase the lapse rate. Finally, among the financial variables, low income, low expenditure, the existence of children that incur child care expenditure, not expecting to bequest from spouse, not holding public health insurance, and expecting to benefit from a retirement pension increase the lapse rate. Some of these findings are consistent with those in the literature.
Keywords : surrender, lapse rate, determinants, lasso regularized regression, panel survey data, random forest missing value imputation