Conversion ratio

What is the conversion ratio?

The conversion ratio in insurance distribution is the percentage of prospects at one stage of the sales process who move to the next stage, and ultimately to an issued policy. The most quoted version is lead to policy: of every 100 leads a channel receives, how many become in-force policies. Insurers also track conversion inside each step, such as meetings to proposals and proposals to issued policies (the issuance ratio).

Conversion is a channel metric rather than a regulatory one. IRDAI does not prescribe it, and every insurer and intermediary defines the stages slightly differently.

How conversion ratios are calculated

Each stage is a simple ratio: conversion = count at the later stage ÷ count at the earlier stage × 100.

Worked example (illustrative numbers)

A bank partner passes 1,000 leads to an insurer in a month.

• 600 are contacted (60%).
• 240 attend a meeting or complete a quote (40% of contacts).
• 90 sign a proposal and pay (37.5% of meetings).
• 75 policies are issued (83% issuance ratio). The rest are declined, postponed or dropped at medicals.
• 72 survive the free look period.

End-to-end lead to retained policy conversion is 72 ÷ 1,000 = 7.2%. If the issuance ratio rose to 90% by fixing document and medical drop-offs, the same leads would give about 78 retained policies.

What moves the conversion ratio

• Lead quality. Leads from existing customers, renewals and service interactions convert far better than bought or cold leads.
• Speed. Online insurance leads lose value within hours. Fast first contact is the cheapest conversion gain.
• Underwriting friction. Medical tests, income proof and repeated document requests are where many proposals die. Tele-medicals, video KYC and data from CKYC records shorten the journey.
• Product fit. A product the seller can explain in a few minutes converts better than one that needs a long illustration.
• Seller skill and follow-up. Most sales need more than one conversation. Pipeline discipline (logging every lead and its next step) separates strong teams from weak ones.

What the conversion ratio means for distribution

• Find the leaking stage. A low end-to-end figure says little. Breaking it into stages shows whether the problem is lead quality, seller follow-up or underwriting and issuance.
• Treat the issuance ratio as an operations metric. A proposal that has been signed and paid for, then fails at issuance, is the most expensive loss in the funnel. Pending document lists and turnaround times should be reviewed weekly with operations.
• Connect conversion to cost. Conversion drives cost of acquisition per policy. Doubling conversion on paid digital leads halves the marketing cost per policy.
• Do not push conversion at the expense of suitability. Pressure to close every meeting produces cancellations in the free look period and lapses at the first renewal. Conversion targets work best when measured on policies that are retained, not just issued.
• Compare like with like. Conversion on bank customer leads, aggregator leads and agent-sourced prospects will never be the same. Benchmarks should be set per source.