Understanding Lapse Rate
How we calculate. Lapse % = lapses ÷ in-force (or renewals due) × 100. The form uses the same arithmetic as the worked examples on this page. See our methodology and accuracy policy.
Real-world scenario: A typical Lapse Rate case uses lapsed policies 120 and base policies 1000. Enter the same figures below to reproduce the worked path.
What is Lapse Rate?
A persistency risk KPI. When the base is renewals due, lapse often complements retention (100% − retention) if definitions match.
- Label the base (in force vs due)
- Same product cohort
- Pairs with retention ratio
The Formula
Worked Example
Common Use Cases
- Persistency monitoring: book runoff
- Pricing actions: shock lapse
- Agency quality: involuntary vs voluntary lapse
Pro Tips
- Separate non-pay vs insured-initiated
- Exclude mid-term rewrites if SOP says so
- Align with retention cohort
Limitations: Lapse Rate results are educational insurance and agency planning aids—not underwriting, actuarial, claims, or financial advice. Confirm statutory definitions with your carrier, regulator, and finance teams.
FAQ
Is lapse always 100% minus retention?
Only when both use the same renewal-due base and every non-renewal is counted as a lapse.
What if base policies is 0?
Lapse rate is undefined—enter a positive base count.
Authoritative References
For insurance ratio and reporting concepts, consult:
- NAIC — U.S. insurance regulatory resources
- Casualty Actuarial Society — actuarial education resources
- Insurance Information Institute — industry explainers