New Analytical Techniques Focus On Policyholder Behavior

By Cyril Tuohy

InsuranceNewsNet

One of the nation’s largest life insurance carriers is joining forces with two global consulting firms to apply new modeling techniques to study the behavior of annuities policyholders, Lincoln Financial Group has announced.

The techniques, built around predictive modeling and attribution-based modeling, are designed to explore utilization patterns among policyholders with regard to income start times and withdrawal amounts, Lincoln said.

“By using predictive modeling, life insurers get deeper and more robust insights from their experience data, which in turn allows for improved pricing analyses and more precise risk management,” Guillaume Briere-Giroux, a senior consultant with Towers Watson, said in a statement.

Lincoln, which is in the midst of raising prices on annuities and adjusting features of its variable annuities product line, said the modeling techniques will also help the company improve its assumptions used in setting terms and pricing, along with valuations of variable annuities, which invest a portion of the premium in search of higher returns.

Ultimately, the new information derived from the modeling will help the company and the rest of the industry develop new products, Lincoln said.

Advanced analytics will bring “greater clarity” around policy lapse rates and income utilization, Mark Konen, president of Insurance and Retirement Solutions for Lincoln, said in a statement. “These techniques will move our industry forward as they have done in other segments.”

Aaron Sarfatti, a partner with Oliver Wyman, said the approaches represent the “leading edge” in linking the withdrawal behavior of a policyholder and the estimates of guaranteed living benefits issued by the annuity.

The new announcement comes at a time when income security has risen to the top of the retirement industry agenda as consumers admit to being ill-prepared for retirement in the wake of the recession, and due to rising prices from everything from health care to education, according to consumer surveys.

In response, the industry is looking to deepen its knowledge about how to provide guaranteed lifelong retirement income, either as a separate investment or as an option offered by company-sponsored retirement plans.

Most 401(k) participants do not have the option to annuitize their account balances within their plans upon retirement, and earlier this month LIMRA announced it would begin tracking in-plan guarantee assets for the first time.

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at Cyril.Tuohy@innfeedback.com.

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at cyril.tuohy@innfeedback.com.