Persistency rate high among online policyholders

While five-year persistency rate among insurance policyholders in India is less than 20 per cent, insurance repositories are seeing persistency of 93 per cent among their account holders. With Irdai mandating that electronically bought policies should be kept with repositories, the market is expected to double every year for the next three years.

As per data from Irdai 61 per cent of life policies lapse after the 13th month of taking the policy as the customer fails to pay the first year premium even after a grace period of one month. Unit linked policies with a five-year lock-in period see a better persistency rate. But the industry finds that the number of customers persistently paying the premium after five years drops to less than 20 per cent.

LIC, which has a slightly higher portion of single premium policies, has seen five to eight per cent more persistency rate. However, among policyholders who keep their accounts with insurance repositories, persistency rate is as high as 93 per cent, said SV Ramanan, CEO of CamsRep.

“Those who keep their insurance accounts with repositories are more evolved customers. Insurance repositories hold these policies in electronic format and the customers can access all their insurance policies at one place. Timely communication helps renewals. Our experience shows that policy lapse happens mostly due to lack of timely communication,” said Ramanan. There are four insurance repositories – CDSL, Karvy Insurance Repository,  National Insurance-policy Repository, and CamsRep.

According to Ramanan, repositories are poised to see significantly high growth in the coming years as the Irdai last month mandated keeping all the electronically bought and renewed policies with repositories. “Currently all the repositories will have a total one million accounts against 40 million policies being added every year and the total policy holder base of 400 million. Currently, 7 to 10 per cent of the life policies are in the electronic format and addition of these policies to the repositories will see the number of accounts doubling before the end of this year,” he added.

High growth in the online purchase and renewal of policies is expected to see repository accounts double every year for the next three years, he further said.

Online renewal of motor policies too is growing fast. Self-certification of motor claims will help more people renew and make claims online. This too will increase the volume of business done by repositories.

Currently, repositories offer their services free of cost to customers. Repositories earn their revenue from the insurance companies for taking care of customer engagement, communication and client servicing.

Sangeetha G.