Insurance companies and intermediaries like agents and brokers should set a target of achieving better persistency ratio (renewal ratio), said IRDAI Chairman Dr. Subash C Khuntia, at the CII 22nd Insurance and Pensions Summit.
“I have set a target that 13th month persistency should not be below 90% and 61st month persistency should not be below 65%,” said Khuntia. He urged the insurance sector and especially the life insurers and intermediaries to move towards achieving these targets.
Persistency rate is the rate of renewal of insurance policies. It measures the number of policies retained in the books of insurers and reflects the insurer’s practices in selling various products.
According to IRDAI insurance handbook, the 61-month persistency ratio is above 50% only for four life insurers (including LIC of India). Many insurers have persistency ratio of 30-40%. That means, only about 40% of the policies are continued beyond five years out of an average term of 15 years.
Khuntia further said that general insurance companies should also focus on building long-term relationship with policyholders. He said, "For general insurance companies also, although we do not have a persistency figure, but your repeat purchase or renewal of policies that should be an indicator of your customer relationship.”
The IRDAI chief further said, “It was of utmost importance for insurance companies to keep a few things in mind, viz., customer centricity, developing innovative and appropriate products to cater to the needs of the people, developing jobs and income loss products, gadget Insurance, bite sized insurance and use-base insurance along with transparent claim handling procedures, etc.”
Further, he mentioned that even during these unprecedented times, the insurance industry witnessed positive growth of 2.4% between April and August 2020.
Tapan Singhel, Chairman of the CII National Committee on Insurance and Pensions mentioned that the IRDAI was swift with its actions when corona first struck the country.
Singhel presented data to show how the insurance industry touches the lives and livelihood of common people. He said, “The insurance industry provides direct employment to over 36 lakh people and there is much to be done as we have not even touched the top soil with the roots which are destined to run deep.”