Page 24 - The Insurance Times October 2021

Persistency Ratios between 30% and 49% (16 out of 24). bought from the insurers are not really bought for the
Again, 4 insurers have Persistency Ratio below 30%. purpose of either protection or savings but mainly for

Y Only, four insurers have Persistency level at around 50% investment purposes.
or more. These are AEGON (50%), ICICI Prudential
From my years of experience of working in the industry, I
(53.3), IDBI Federal (49.94) and LIC (51). These ratios
are not too satisfactory but at least better than others can say with certainty that it is very difficult to retain
who have alarmingly low Persistencies. customers for a long time unless a bond is created with them
from the very beginning. Before the sector was opened up
Y A low persistency means a high level of dissatisfaction in 2000, the insurance agents knew the customers they had
with the insurers. Either agents sold the wrong policies
brought in like the back of their palms. There was less of
or they are not in touch with the customers or the
insurers are not able to engage the customers with a digitisation of services and almost all services used to be
given manually with the agents considered as the only
congenial relationship. In many cases, the reason is a
combination of all these factors. customer touch points. Post opening up of the insurance
sector, the competition has come and has even increased
in intensity over the years. Agents are no longer the only
In the developed insurance markets of the world, the
corresponding ratios are not below 70 to 80%. Indian insurance intermediaries.
insurers have to develop strategies to sell right policies to
the people and then keep them properly engaged through There are brokers, corporate agents including banks,
various channels so that the policies are not abandoned after Insurance Marketing Firms (IMF), "Referral Agencies", NGOs
a few years. Better policy persistency is beneficial to both etc. selling policies everywhere. Many policies are also sold
the customers and the industry. through web aggregators and other digital channels.
Services are provided through digital mediums. However,
We can look at the matter from another perspective. Let's expectations of new age customers are far more than what
look at the type of benefits paid by the insurers in the last they were twenty years before. Customers expect a greater
two years. Table-6 clearly shows that private insurers are level of customer sensitivity from the insurers and their
mostly paying surrender values and withdrawal values representatives in addition to a satisfactory level of servicing.
(under ULIPs).
If a bond is not created between insurers and the customers,
Table-6 clearly reveals that the private insurers as a whole there is a risk that the policies will be discontinued after a
are paying more surrender payments than maturity/death few years. Insurers have to devisce means to be in touch
claim payments. LIC on the other hand are making less with the customers either better trained customer care
surrender payments in comparison to maturity and death executives or field officials or even through Artificial
claim payments they are making. To be precise, 28% of LIC's Intelligence (AI) powered Analytics and Chatbots. For tech
payments of benefits were surrender payments (which is also savvy young customers, Customer Service Apps, Chatbots,
quite high) in 2018-19 while 52% of benefits paid by the social media can be appropriate channels to be in touch.
private insurers in that period were surrenders or For rural customers, personal touch of the agents may be
withdrawals. This means that a large number of policies more desirable.

Table-6: Benefits Paid by Life Insurers in last two years (in crores)

Insurer 2017-18 2018-19
Surrenders/ Others Total Surrenders/ Others Total
Withdrawals (Maturity, Withdrawals (Maturity,
Death) Death)
LIC 51677.91 145040.13 196718.04 69237.27 180047.59 249484.86
Private 47587.09 33648.50 81235.59 41931.73 38461.69 80393.42
Total 99265.00 178688.63 277953.63 111169.00 218509.28 329678.28

Source: IRDAI Annual Report 2018-19

24 The Insurance Times, October 2021