It is very often seen that the general insurance buyer's consistency in their purchase is important. And this will only happen if the insurer is well qualified and knowledgeable about the policies they going to offer to their clients. So, buyers can avail all the benefits of the scheme.
Lalitha Bhatia, chief operating officer, Ageas Federal Life Insurance, said, “Persistency ratio is derived by understanding the number of premiums paid by policyholders against the number of premiums payable and measured at different stages in the life of the policy. These stages are like a first-year (13th month), second-year (25th month), etc."
It is important for the buyers that they should also understand the persistency ratio before they buy any policy.
Persistency means how many times an insurer sells a policy and the buyer renew it, again and again, this is important to ask. As in this way you will understand the reasons why some policies and not renewed or which are the good policies with a good claim procedure. The persistency ratio also helps the buyers the comfort of safety.
According to the Insurance Regulatory and Development Authority of India’s Insurance Handbook, the 61-month persistency ratio is above 50% only for four life insurers (including LIC of India). Mostly, insurers are maintaining the ratio at the level of 30-40%. That means, only about 40% of the policies are continued beyond five years out of an average term of 15 years.
A higher rate of persistency ratio represents a good relationship between the buyer, insurer, and the policy that matches their need and fulfilling the requirements of the buyers completely.
Long term relationship between buyer, insurer, and policy, not only helps to grow buyers and insurers but also benefits everyone even the economy of the country.