When people compare insurance companies, they usually discuss

·       Claim Settlement Ratio

·       Premium amount

·       Policy Benefits

·       Marketing Advertisements

But there is another important metric that receives far less attention. It is called as “PERSISTENCY RATIO,” and it may reveal far more about policyholder behavior than most consumers realize.

What is Persistency Ratio?

Persistency Ratio measures the percentage of policyholders who continue paying their insurance premiums over time. In simple words, it answers one question,

“How many people who purchased a policy are still continuing it after certain number of months or years?”

This metric is closely monitored by regulators and insurance companies because it provides insights into long-term policy retention.

Why is Persistency Ratio Important?

Insurance is designed to be a long-term financial commitment. Many life insurance policies are intended to remain active for 10 years, 15 years, 20 years or ever longer. However, if large number of policyholders discontinue their policies within the first few years, it raises important questions. 

·       Were customers properly educated before purchase?

·       Was the product suitable for their needs?

·       Did they understand the premium commitment?

·       Were expectations properly set?

Persistency Ratio helps answer these questions.

A Simple Example

Imagine a company hires 1,000 employees. The company spends money on

·       Hiring

·       Training

·       Infrastructure

·       Onboarding

Now imagine that 500 employees resign within a short period. The company would naturally ask “Why are people leaving?” and insurance companies face a similar challenge when large number of policyholders discontinue their policies early.

Why do Policies Lapse?

There can be many reasons, a few shared below

Financial Constraints – Policyholders may face changes in income or financial priorities.
 

Lack of Understanding – Some buyers may not fully understand the long-term commitment required.
 

Product Mismatch – The policy purchased may not align with the customer’s actual needs.
 

Mis-Selling – In some cases, unrealistic expectations or incorrect explanations during the sales process can lead to policy discontinuation.
 

Poor Servicing Experience – Lack of ongoing support may also contribute to policy lapses.

Why Should Consumers Care?

Persistency Ratio is important because it can provide insights into how successfully policyholders remain committed to a product over time. A stronger persistency experience may indicate

·       Better customer education

·       More suitable product recommendations

·       Higher customer engagement

·       Greater policyholder confidence 

While no single metric should determine your decision, Persistency Ratio deserves attention alongside other indicators.

What Should You Do Before Buying Insurance?

Learn to say “NO.” Never purchase a policy because of sales pressure, urgency or fear. Take time to evaluate your financial decision and “USE A CHECKLIST” to review your financial goals, premium affordability, policy tenure, benefits, exclusions and commitments.
 

Ask Tough Questions

·       Why is this policy suitable for me?

·       What happens if I stop paying premiums?

·       What are the long-term commitments?

·       What are the surrender implications?
 

Choose The Right Intermediary

The quality of advice often determines the quality of the insurance decision. Work with professionals who focus on suitability rather than sales.

Insurance Is More Than A Product

Many people view insurance as a purchase. In reality, insurance is a long-term promise. A promise that may need to protect your family years or decades from today. That is why understanding metrics like Persistency Ratio can help consumers move beyond marketing and focus on long-term value.
 

Final Thought

The best insurance policy is not the one that is purchased. The best insurance policy is the one that remains suitable, affordable and active for long-term. Before buying insurance, don’t just ask “WHAT IS THE ANNUAL PREMIUM?”

Also ask “WILL I BE ABLE TO CONTINUE THIS POLICY FOR YEARS AHEAD?” Because insurance is not just a product, it is a promise. Make sure it is a right one.

INSURANCE AWARENESS > INSURANCE IGNORANCE