Analysis of Factors affecting the Consumer Decision to extend the long-term Life Insurance Policy

In my work I have analysed factors affecting policyholders decision to cancel their whole life insurance policy. As a case study I used data given by the russian subsidiary of MetLife. I found enough evidence in support of well known emergency fund and interest rate hypothesises. Furthermore, I made a first attempt to include the full spectrum of influences which can affect the customer decision making about prolonging his policy, such as his personal characteristics, history of his relationships with a company and his movements among distributional channels. Logistic model provides me with tools to particularly distinguish changes in the current period from the previous state. I consider them to substantally affect client loyalty and be the important reason of lapse behaviour in life insurance industry. Finally, I introduced the well known concept of Customer Lifetime Value, which can be very useful given the current empirical findings for building a customer driven marketing strategy. It is based on segmenting the clients and targeting those combining the higher customer value for the company and risk of lapsing. By introducing new ways of customer retention it is possible for life insurance to icnrease it’s market share and for regulators to provide the higher eficiency of the market.