Large-scale surrender of insurance policies, particularly unit-linked insurance plans, has forced the regulator to examine the issue. Renewal of insurance policies is measured by a parameter called persistency.
According to IRDA (Insurance Regulatory and Development Authority) data, in fiscal 2012 life insurers had to pay Rs 71,208 crore on account of surrenders (withdrawals), of which, LIC paid Rs 41,531 crore and private sector insurers, the balance.
In fiscal 2012, ULIPs accounted for 68 per cent of the total surrender for LIC, and 97 per cent of the total for private insurers.
Persistency measures the number of policies retained in the books of an insurer. If a lot of policies lapse (non-renewal), then it could be taken as a sign of mis-selling by insurers. Currently, life insurers are required to provide persistency ratio numbers (percentage of policies on which premiums are still being paid after their sale) to the regulator on an annual basis.