The Indian life insurance industry continues to manufacture and sell products that die early. According to the Handbook of Statistics published by the insurance regulator, in FY17, the life insurance industry was able to retain an average of 65% of its policies after the first policy year and 34% after the fifth policy year. This means that one in three policies sold don’t survive 5 years. These numbers compare poorly with the global average, where life policies retain close to 90% of their customers after a year of sale and about 65% after 5 years.
In insurance parlance, policy retention is known as ‘persistency’ and ‘persistency ratio’ measures how long customers stay with their policies, by looking at the number of policy renewals year after year.