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Effect of Premium Payment Frequency on Insurance Policy Persistency

Abstract

The study examines the effect of premium payment frequency on insurance policy persistency, focusing on how the frequency with which policyholders pay their premiums influences their ability and willingness to maintain insurance coverage over time. Premium payment arrangements may be structured on a monthly, quarterly, semi-annual, or annual basis, and these arrangements can affect the financial convenience and payment behaviour of policyholders. Policy persistency is important to insurers because sustained policies support stable premium income, improve portfolio performance, and reduce the financial effects associated with policy lapses. The study will investigate the relationship between premium payment frequency and insurance policy persistency. It will examine whether policies with more frequent premium payments experience different levels of continuation compared with policies involving less frequent payment arrangements. The study will also consider how payment regularity and the timing of premium payments influence the likelihood that a policy remains active throughout its intended duration. The study will focus on factors such as monthly, quarterly, semi-annual, and annual premium payment frequencies, policy duration, premium amount, policyholder age, payment regularity, and previous payment behaviour. Persistency rates will be calculated across different payment-frequency categories to identify variations in policy continuation. Actuarial lapse and survival techniques may also be applied to examine the probability that policies remain in force over successive periods. A quantitative research approach will be adopted for the study. Relevant secondary data on insurance policies, premium payments, policy durations, lapses, renewals, and policyholder characteristics will be analyzed. Descriptive statistics, persistency-rate calculations, comparative analysis, and appropriate statistical techniques will be employed to determine the relationship between premium payment frequency and policy persistency. The analysis will provide evidence on payment patterns associated with stronger or weaker policy continuation. The study is expected to reveal that premium payment frequency has a measurable influence on insurance policy persistency. Policies with payment arrangements that are more convenient and consistent with policyholders’ financial capacity may demonstrate higher persistency rates, while payment arrangements that create greater financial pressure may be associated with increased lapses. However, the effect is expected to vary according to policy characteristics, premium levels, and policyholder payment behaviour. The findings are expected to be useful to insurance companies, actuaries, underwriting managers, policymakers, and policyholders. The study may assist insurers in designing premium payment structures that encourage continued policy participation and reduce unnecessary lapses. It may also provide useful actuarial information for estimating future premium income, assessing policyholder behaviour, and developing more reliable persistency and lapse assumptions for insurance pricing and valuation. The study concludes that premium payment frequency is an important factor in understanding insurance policy persistency and should be considered in policy design and actuarial analysis. It is therefore recommended that insurers regularly assess persistency experience across different payment frequencies and provide flexible payment arrangements that encourage timely premium payments. Actuaries should also incorporate observed payment-frequency patterns into lapse and persistency assumptions to improve the accuracy of insurance projections and portfolio management.

Keywords: Premium payment frequency, insurance policy persistency, policy lapse, premium payments, policyholder behaviour, policy continuation, insurance policies, actuarial analysis, lapse rates, payment regularity, policy duration, insurance portfolio, premium income, policy retention, insurance management.