Research On Surrender Issues Of Life Insurance Market By Agent-based Modeling

Policy surrender is almost accompanied by the whole operation process of life insurance. However, extensive policy surrender will lead to a large amount of capital outflow, threaten the company’s operation of funds and solvency seriously, and even possibly bring a financial crisis. Since2011, life insurance industry in China has faced surrender rates in peak again. The China Insurance Regulatory Commission issued THE NOTICE OF STRENGTHENING MANAGEMENT OF THE SURRENDER BUSINESS TO PREVENT AND DEFUSE THE SURRENDER RISK.. Local Insurance Regulatory Commissions vigorously response the notice, and regard preventing and eliminating the surrender risk as an important work in2012. Under the double pressures of profits and regulatory, life insurance company actively build the system which can warn and respond to surrender risk.This paper chose the perspective from the surrender behavior of policy holders, simulated the surrender rates of China’s life insurance market by Agent-Based Modeling. On micro level, the paper, firstly, classified the main players based on their behavioral characteristics, and established decision-making rules and interaction rules respectively for every type of market subject. Then, the paper built the surrender model of life insurance by NetLogo. Under the virtual external macro-environment, each subject chooses corresponding surrender decision based on their own situation and the interaction. On macro level, through simulation result, and by calculating the surrender rates of each year under different external macro-environment, the paper drew a conclusion which is consistent with historical data. Finally, by changing corresponding assumed parameters conditions, and observing the variation of surrender rates, the paper gave some suggestions to decrease surrender risk under the unalterable economic environment.This paper is divided into three parts:The first part is introduction part. It introduced the background and significance of this study and summarized the relevant literatures, providing the basis for the paper. The second part is the core of this paper. First of all, it elaborated the theoretical basis and research methods. Then, it built the Agent-Based surrender model by assuming life insurance market in simple way. By simulating this model in NetLogo and analysis the result, the paper gave some corresponding suggestions finally. The final part is conclusion, which is the summary of the whole paper.