An application of Sigmoid and Double-Sigmoid functions for dynamic policyholder behaviour
The growing relevance of risk-based valuations of insurance contracts has stimulated the extension of the traditional deterministic lapse rate models towards a dynamic modelling. A popular dynamic model uses deterministic lapse rates as base rates and dynamic adjustment factors, generally assuming a relationship between lapses and one or more economic factors to describe policyholder behaviour. This relationship is generally represented by an S-Shaped function.