Lapse rates can reveal a wealth of information about the advisor books within an MGA; including, how they may have been approached by previous advisors. If dishonest advisors were making unnecessary new sales to policyholders to make large commissions, these new policies are likely to lapse within a year or two after sale.
When a significant number of advisor books have been churned like this, it negatively affects the value of the MGA. Although revenue could be high, if lapse rates are also high there is very little long-term value.
In our experience, advisors are ruthelessly honest and hard-working people; however, lapse rates are still important to factor into the valuation.