![]() ![]() This behaviour is largely caused by poor sales practices followed by the insurance industry. Poor persistency is primarily the result of policyholders surrendering or lapsing their policies midway. “This is a concern because the 13th-month lapses are particularly costly for buyers, and this should have been on an upward trend by now,” said Mehta. According to the latest handbook of statistics published by Insurance Regulatory and Development Authority of India (Irdai) for financial year (FY) 2014, persistency ratios for the 13th month fell for 13 of the 24 life insurance companies. Ltd.Įven the 13th month persistency ratio doesn’t look promising. Internationally, this is over 65% on an average,” said Kapil Mehta, executive director, SecureNow Insurance Broker Pvt. This means that half the policyholders left within five years. “Almost the entire industry has lower than 50% persistency in the 61st month. The global level for 61st month persistency is around 65%. How long customers stay with their policies is determined by the persistency ratio, which indicates the number of policies that continue to generate renewal premiums that are due to be paid. However, the latest persistency numbers released by the insurance regulator point out that the industry on an average is unable to retain even a third of its customers at the end of five years of a policy. Costs of a 15- or 20-year product are front loaded on the assumption that the policyholder will stay the course for the full term of the policy. Life insurance is a long-term contract and the costs are built keeping this in mind. ![]() A look at a single metric, which the insurance regulator releases, clearly points to large-scale malpractice in the industry. What would you call a product that is sold for 15 years but discontinued after just five? What would you call an industry that is unable to keep customers holding on to a product that was sold for the long term but is stopped midway? In India, we’d call this the life insurance industry, which is displaying signs of huge churn-losing customers on one hand, and trapping new ones on the other.
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