Life Insurance Persistency Ratio
What policy persistency measures, why it matters more than it sounds, and how to read IRDAI's five-tenor data.
What is the persistency ratio?
The persistency ratio measures the proportion of life insurance policies that are still active (in-force) after a given number of months from inception. A persistency ratio of 85% at the 13th month means that 85 out of every 100 policies sold are still active one year after purchase — the remaining 15% have lapsed, surrendered, or been discontinued.
It is a proxy for the quality of sales — policies sold with proper need-analysis and suitable product matching tend to persist; mis-sold or push-sold policies lapse early. It is also a proxy for the insurer's financial health, since lapsed policies lose future premium income and often trigger surrender value payouts.
Five tenors: what the month labels mean
IRDAI requires life insurers to report persistency at five durations, referred to by the month of the anniversary premium:
| Tenor label | What it measures | Significance |
|---|---|---|
| 13th month | Active at 1-year anniversary | The most-cited figure; captures first-renewal lapse |
| 25th month | Active at 2-year anniversary | Captures second-year free-look exits |
| 37th month | Active at 3-year anniversary | Medium-term indicator |
| 49th month | Active at 4-year anniversary | Important for ULIP surrender cliff (typically after year 5) |
| 61st month | Active at 5-year anniversary | Five-year persistency; highest-quality signal for long-term health |
Regular premium vs single premium — and count vs premium
IRDAI reports persistency separately for two policy types:
- Regular premium: Policies where the policyholder pays a recurring premium (monthly, quarterly, annually). This is the standard term and endowment structure. Lapse here has a direct impact on the insurer's future premium revenue.
- Single premium: Policies where the entire premium is paid at policy inception. Lapse here typically means surrender — the policy is terminated and a surrender value is paid out. The persistency ratio for single-premium policies measures whether these policies stay active or are surrendered early.
Within each type, IRDAI additionally reports by premium (rupee value) and by count (number of policies). The count-based ratio gives equal weight to every policy; the premium-based ratio is value-weighted. For most analysis, count-based persistency is the consumer-relevant figure; premium-based persistency matters for financial modelling.
Source: IRDAI Form L-22
Persistency data for all life insurers is published in IRDAI Form L-22 (Analytical Ratios), which each life insurer files quarterly. The form contains both the 13th-month and the 61st-month persistency in a single table, broken down by regular/single and premium/count dimensions.
The form is published on each life insurer's disclosure page — not on irdai.gov.in. This platform extracts the L-22 data quarterly.
What is a good persistency ratio?
Industry benchmarks (FY2024-25) for regular premium, count-based, 13th-month persistency among private life insurers range from 70% to 90%. LIC, given its very large policy base and government trust positioning, reports higher 13th-month persistency. For 61st-month persistency, the range drops significantly — 60% to 80% is typical, with higher figures indicating disciplined distribution.
IRDAI has noted in its Annual Reports that improving persistency is a regulatory priority. Insurers with persistency below 60% at the 13th month are subject to closer scrutiny of their distribution and mis-selling practices.