Lapse Ratio (Health Care) Law and Legal Definition

Lapse ratio refers to the percentage of life insurance company's policies that were in force during the beginning of the year and that are not there at the end of the year because of surrender and lapse of policies. Lapse ratio indicates the rate at which policies are going off the books and the loss of earnings of the company resulting from such lapses. It indicates the average insurance in force for the year. It is the key internal operating parameters that reflect both consumer behavior and company’s rating.