ILA 101: A lapse sensitivity depends on the product’s cash flows
Higher lapse can hurt acquisition-cost recovery but release future guarantees or benefits. The net direction is product-dependent. Explain the mechanism instead of attaching a universal favourable or adverse label.
Original practice scenario
In an original product, expenses occur at issue and premiums arrive later. Increase early lapse and trace the lost future premiums and avoided future costs separately. Then compare with a product carrying an expensive guarantee to explain why the direction can differ.
Study check
Write the assumptions, the decision being supported and one limitation. Use the current course syllabus for the required terminology and scope; this introductory guide is not a complete course summary.
Reading sources
ActNet editorial guide · October 1, 2026 · Original illustrative examples.