# Survival Analysis Definition

## What is Survival Analysis?

Survival analysis, also known as time-to-event analysis, is a branch of statistics which studies the time it takes before a particular event of interest occurs.

Insurance companies use survival analysis to predict the death of the insured and estimate other important factors such as policy cancellations, non-renewals and the time it takes to file a claim. The results of these analyzes can help providers calculate insurance premiumsas well as customer lifetime value.

### Key points to remember

• Survival analysis is a branch of statistics that studies how long it takes for certain cases to occur.
• It was originally developed in the biomedical sciences to understand the onset of certain diseases, but is now used in engineering, insurance and other disciplines.
• Life insurance company analysts use survival analysis to estimate the probability of death at different ages, taking into account health factors.
• This information is used to estimate the likelihood that a policyholder will outlive their policy, which, in turn, influences insurance premiums.

## Understanding Survival Analysis

The analysis of survival comes mainly from the medical and biological disciplines, which take advantage of it to study death rates, organ failures and the occurrence of various diseases. Perhaps this is why many people associate survival analysis with negative events. However, it can also apply to positive events, such as how long it will take someone to win the lottery if they play it every week.

Over time, survival analysis has adapted to the biotechnology sector and also has uses in economymarketing, machine maintenance and other fields than insurance.

Survival analysis was originally developed in the biomedical sciences to examine the rates of death or organ failure during the onset of certain diseases, but is now used in fields ranging from insurance and funding for marketing and public policy.

### Insurance

The analysts of life insurance companies use survival analysis to describe the incidence of death at different ages given certain health conditions. From these functions, calculating the probability that policyholders outlive their life insurance coverage is fairly straightforward. Providers can then calculate an appropriate insurance premium, the amount charged to each customer for protection, also taking into account the value of potential customer payments under the policy.

Survival analysis also plays an important role elsewhere in the insurance industry. For example, it can help estimate how long it will take drivers in a particular ZIP code to have a car accident, based not only on their location, but also on their age, type of insurance they subscribe and the time elapsed since they filed a last claim.