Policies which were sold on a "vanishing premium" basis are
expected to exhibit a different payment pattern than those sold on other bases.
Thus, although a company can measure persistency, the appropriate standard to which this experience should be compared would be very difficult to determine.
The measurement of the persistency itself, however, will also present problems. My company credits premiums as they are received, rather than on the subsequent policy monthaversary. We send bills 15 days prior to the scheduled due date. If a policyholder receives a bill and pays prior to an anniversary due date, the premium will be recorded as received in the prior year. Thus, measuring premium persistency by policy year for annually billed contracts will be very touchy. A better approach may be to measure
cumulative payment persistency. This amount, however, is subject to guideline premium limits which must be anticipated.
-- JAMES M. ROBINSON
1983 - Universal Life, Society of Actuaries - 24p- RSA83V9N212