Persistency ratio

What is the persistency ratio?

The persistency ratio measures how many life insurance policies sold in a period are still in force and paying premiums at a later checkpoint. Indian insurers report it at the 13th, 25th, 37th, 49th and 61st month after issue, which correspond to the first renewal premium of policy years two to six. A 13th month persistency of 80% means that 80% of a group of policies (or of their premium) paid the first renewal on time.

The inverse is the lapse rate. If 13th month persistency is 80%, the 13th month lapse rate is 20%. Persistency applies to regular premium and limited premium policies, because a single premium policy has no renewal to miss.

How the persistency ratio is calculated

Persistency is measured on a cohort: all policies issued in a defined 12-month window. The insurer checks which of them have paid the renewal due at each checkpoint, after allowing for the grace period.

• Premium basis: annualised premium of cohort policies still paying at month N ÷ annualised premium of all cohort policies × 100.
• Policy count basis: number of cohort policies still paying at month N ÷ number of policies in the cohort × 100.

IRDAI set a standard calculation method in a circular of 23 January 2014 so that ratios are comparable across insurers. Current disclosures cite IRDAI's Master Circular on Submission of Returns, 2024 (dated 14 June 2024) for the method. Insurers measure on a rolling 12-month cohort with a lag of about a month, so the grace period has run out before a policy is counted as lapsed. Each insurer states its cohort window in the footnotes to its disclosure.

Worked example (illustrative numbers)

An insurer issues 1,000 regular premium policies in a year with total annualised premium of ₹2.5 crore.

Premium persistency is higher than policy persistency here because larger policies lapse less often than small ones. That pattern is normal in India.

How persistency is reported in Indian public disclosures

Every life insurer publishes form L-22 (Analytical Ratios) each quarter as part of its IRDAI public disclosures. L-22 gives persistency at the 13th, 25th, 37th, 49th and 61st month, on two bases (premium and number of policies) and for two groups: regular or limited premium policies, and single premium or fully paid-up policies. Each figure appears "for the quarter" and "up to the quarter".

LIC's L-22 for the year ended 31 March 2025 shows the gap between the two bases clearly:

Among private insurers, SBI Life reported 13th month premium persistency of 87.1% and 61st month persistency of 58.8% for the nine months to December 2025. Industry comparisons published by the trade press from L-22 data for April to December 2025 showed 13th month premium persistency ranging from about 60% to about 87% across insurers. The same L-22 form also carries the conservation ratio, commission ratio, solvency ratio and average ticket size.

What moves the persistency ratio

• Quality of the sale. Policies sold on a need analysis, with premium the customer can afford, renew. Policies sold to meet a target, or bundled with a loan or deposit, lapse. Poor 13th month persistency is often the first sign of mis-selling.
• Product type. Long premium paying term savings plans lapse more than short-pay plans. ULIPs move with market sentiment.
• Premium mode. Monthly payers through auto-debit (NACH or UPI AutoPay) renew better than annual payers who must act once a year.
• Channel and partner. Persistency varies widely by bank partner, branch, broker and agent, which is why insurers track it at that level.
• Servicing. Renewal reminders, easy payment links and revival campaigns in the grace period recover a meaningful share of policies.
• Customer economics. Since October 2024, revised surrender value norms pay a special surrender value after the first full year's premium, so an early exit costs the customer less than before. That has made early-year retention more sensitive to service quality.

What the persistency ratio means for distribution

Persistency is the metric that links a sale to the insurer's profit. Pricing and value of new business assume a lapse rate, and if real lapses exceed it, the business written loses value. SBI Life's sensitivity analysis for the nine months to December 2025 showed that a 10% proportionate rise in lapse rates would cut its value of new business by 4.8%.

For distribution leaders this has practical consequences:

• Commission is increasingly tied to persistency. After the 2024 surrender value changes, listed life insurers reworked distributor payouts so that part of the reward depends on the persistency of the business a partner brings. Partners with weak persistency can see lower rates or deferred payouts.
• Track by cohort, not by month. A monthly collection number mixes old and new business. Leaders should look at 13th month persistency of each month's sales cohort, by channel, region, branch and seller.
• Use both bases. A good premium persistency figure can hide a poor policy count figure if a few large policies are holding up the average. A low count figure usually points to small-ticket, add-on sales.
• Make retention a sales responsibility. The seller who explains the premium commitment at the start, sets up auto-debit and calls before the due date has the most influence on whether the first renewal is paid.
• Watch it in reviews of agents and partners. Many insurers set persistency thresholds for agent contests, promotions and partner reviews, alongside new business targets.