Persistency of Life Insurance policies in India
The persistency of life insurance policies
Based on public disclosures of life insurers, the persistency of policies in indian market is very low. The 13th month persistency is in the range of 60 to 70% for many companies whereas this is more than 90% for many markets outside India. The 61st month persistency is alarming. It is in the range of 20 to 30%.
What is the reason for such a bad persistency?
There are multiple reasons for this. Lack of understanding of insurance product is the main reason. The insurance policy is still seen as a savings vehicle. Hence the sale is based on high returns, sometimes false promises are made on this. Once policyholder understands that the returns are not as high as expected, he is lapsing the policy.
The other reason is lack of need based selling. The sales person sells to his natural market first. To his brother, cousin etc. Since it is based on relationship, the discussion on product hardly happens. Hence the product need not necessarily suit the needs of the policyholder. Once it is realilsed by policyholder, the policy is lapsed.
What’s the way out to improve persistency?
Before buying a policy, it is important to understand the product and see if it meets the need of the policyholder. If this need based selling is done, the lapsation will come down significantly and persistency improves.