Determinants of Insurance Policy Lapsation: A Case Study in AIA Insurance PLC

Abstract

Life insurance penetration level is still very low in Sri Lanka compared to the developing countries even in the South Asian Region. In spite of the slow growth rate of life insurance industry, higher rate of lapsation of life insurance policies is one of the major issue in increasing the level of insurance penetration. This study attempts to identify the factors influencing the life insurance policy lapsation through a sample of 160 life insurance customers of bancassurance channel in AIA Life Insurance PLC. Chi-square Analysis and Logistic Regression were used to evaluate the impact of gender, age group, marital status, income level, insurance agents’ behavior and service quality on life insurance policy lapsation in first three months after the commencement of the insurance agreement. The findings revealed that gender, age group, marital status, income level, and insurance agents’ behavior significantly affected on life insurance policy lapsation. Tangibility and responsiveness do not have a significant effect on policy lapsation but reliability, assurance and empathy have a significant effect on policy lapsation. The findings imply that the life insurance companies should implement programmes to develop the skills of the life insurance sales persons based on the value education and follow target marketing strategies focusing the middle and high income level people