LAPSE RATIO Meaning and
Definition
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Lapse ratio is a term commonly used in the insurance industry to measure the rate at which policies or contracts terminate or lapse before their maturity or expiration date. It refers to the proportion of policyholders or policy contracts that fail to continue paying their premiums and subsequently allow their policies to lapse or become void.
The lapse ratio is typically expressed as a percentage and is calculated by dividing the number of policies that lapse during a given time period by the total number of policies in force at the beginning of that period. For example, if there were 1,000 policies in force at the start of the year and 50 of them lapsed during that period, the lapse ratio would be 5% (50/1000).
A high lapse ratio indicates a higher likelihood of policy termination, which can pose risks to insurance companies as it affects their revenue stream and profitability. Insurance companies closely monitor and analyze lapse ratios to assess policyholder behavior, identify trends, and make adjustments to their underwriting practices or pricing strategies.
Lapse ratios can be influenced by various factors including economic conditions, changes in policy prices, customer satisfaction, competitive market dynamics, and policyholder demographics. It is crucial for insurance companies to strike a balance between retaining policyholders and managing their risks, as a high lapse ratio can impact their financial stability and long-term sustainability.
Common Misspellings for LAPSE RATIO
- kapse ratio
- papse ratio
- oapse ratio
- lzpse ratio
- lspse ratio
- lwpse ratio
- lqpse ratio
- laose ratio
- lalse ratio
- la-se ratio
- la0se ratio
- lapae ratio
- lapze ratio
- lapxe ratio
- lapde ratio
- lapee ratio
- lapwe ratio
- lapsw ratio
- lapss ratio
- lapsd ratio
Etymology of LAPSE RATIO
The word "lapse" originated from the Latin word "lapsus", which means "a sliding or falling". It comes from the verb "labi", meaning "to slide, slip, or fall".
The word "ratio" is derived from the Latin word "ratus", which means "reckoned" or "reasoned". It comes from the verb "reor", meaning "to reckon, think, or suppose".
The combination of "lapse" and "ratio" in the term "lapse ratio" refers to a quantifiable relationship or proportion between lapses or falls. In various fields, "lapse ratio" typically denotes the ratio between the number of lapses or failures and the total number of occurrences or opportunities.
