The purpose of this project is to find a model or several models that will allow John Hancock to understand and predict the loan demand policyholders of permanent life insurance policies will borrow against their type of policy. We will determine if there is a seasonal trend in demand for loans against John Hancock�s life insurance policies and we will identify the significant predictors of changes in loan demand. We will also determine if there is a time lag between a change in the predictor variables and a change in the demand for loans. The amount of loan assets is constantly changing, therefore, we need to have a dynamic model for this problem.
In order to validate the model, we will use data from 1970 to 1997 to predict 1998 loan demand. We will then check our error to see how close the predicted loan demand is to the actual loan demand.