Persistency Ratio

Persistency Ratio is the percentage of life insurance policies (measured by number or by premium) that are still in force at a defined milestone after issuance — commonly the 13th month, 25th month, 37th month, 49th month, and 61st month. It is a key indicator of the stickiness of an insurer's book and, indirectly, of the quality of its sales process. If a large share of policies lapses after the first year, it often suggests the policy was sold to buyers who did not fully understand the product, could not afford the premium long-term, or were persuaded to buy primarily for a short-term benefit.

IRDAI mandates disclosure of persistency at the 13th, 25th, 37th, 49th, and 61st month, on both a premium-weighted and a policy-weighted basis, in the insurer's public disclosures. Worked example: an insurer issues 1,00,000 policies in FY 2022-23 with total first-year premium of ₹500 crore. At the 13th-month mark (one year after the first premium was due), 82,000 of those policies are still paying premium, and the first renewal premium collected from those policies totals ₹420 crore.

The 13th-month persistency by policy count is 82%, and by premium is 84%. Indian industry aggregate 13th-month persistency has historically been in the 70-85% range, with the better-run insurers in the 85-90% band; 61st-month persistency (five-year retention) is meaningfully lower, often in the 40-60% range. A common misconception is that a lapsed policy is always a bad outcome for the policyholder.

Sometimes lapse is a rational response — the buyer realised the product was not a fit, or financial circumstances changed. The concern is with policies that lapse and where the buyer loses premium paid because the surrender value is low — most Indian traditional policies now have improved surrender values under IRDAI's 2024 reforms, but the first two or three years still typically leave the buyer with a partial recovery. Another common misconception is that persistency is mainly a salesforce-quality metric.

It is partly about sales quality, but also about product design (is the premium affordable through a realistic income trajectory? ), customer service (does the insurer proactively remind and collect? ), and macro conditions (a recession or job losses spikes lapses).

Look at persistency alongside claim settlement ratio and solvency when evaluating an insurer's operational strength. Related: lapse, surrender value, solvency ratio.