Life insurers face falling persistency levels

Amid signs of recovery in sales, life insurance companies continue to grapple with low persistency levels, especially in market-linked and endowment products. Experts and players attribute this to the current Covid led economic crisis and concerns about job losses and salary cuts, along with volatility in markets that have impacted products like ULIPs. However, there continues to be demand for protection products, given the current uncertainty, they said. “Historically, in the preCovid times, there has been an uptick in the persistency levels for life insurance companies. But the pandemic has led to a new set of challenges for many customers. While it has created much more awareness about insurance and led to higher demand for term plans and protection products, persistency ratios will remain under pressure, especially for products that are market linked,” said Saurabh Bhalerao, Associate Director, CARE Ratings. He also noted that customers may choose to defer premium payments or opt for lower value in case of plans with a higher premium due. Santosh Agarwal, Chief Business Officer, Life Insurance,, said renewals on protection products have not been impacted and there has, in fact, been a demand for term insurance since the pandemic. “On the savings side, both in endowment products and ULIPs, there has been a slight de-growth in terms of persistency. This could be because of affordability due to concerns about income and jobs,” she said. The IRDAI, too, has urged the industry to ensure 13th month persistency at least 90 per cent and 61st month persistency at a minimum of 65 per cent. Insurers are keeping their fingers crossed about a recovery across these businesses. With the second quarter of 2020-21 now coming to a close, insurers will throw more light on persistency levels in their reporting data. At the recent CII Insurance and Pensions Summit, IRDAI Chairman Subash C Khuntia had said the regulator would be monitoring these ratios. A report by Motilal Oswal recently noted that due to the lockdown in April and May as well as choppy markets, persistency trends were weak across cohorts as customers utilised the grade period in making renewal payments. “Among the segments, decline was seen in persistency in ULIPs, while improving trends were observed in protection,” it said, adding that most insurers indicated that renewal trends were gradually picking up and better trends would be seen in the coming quarters. In the first quarter this fiscal, 13th month persistency declined for SBI Life Insurance to 81.6 per cent from 86 per cent last fiscal and to 87 per cent from 90.1 per cent for HDFC Life in 2019-20.

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