Renewal of life insurers' policies, after 1 year, declines in June quarter

The 13th-month persistency rate of life insurers—an important metric indicating the retention of new policies—declined in the first quarter of 2025-26 (Q1FY26). This fall was primarily driven by a lower share of high-value policies, following taxation changes implemented in April 2023.

- AATHIRA VARIER

The 13th-month persistency ratio in life insurance indicates the percentage of policies renewed after the first year.

In February 2023, the government decided to tax income from traditional insurance policies, other than unit-linked products (Ulips), having premiums above ₹5 lakh in a year to plug the arbitrage.

High-net-worth individuals (HNIs) were using this to get tax-free returns on their high-value insurance policies through Section 10(10D).

Under Section 10(10D), individuals can avail of tax exemption on the sum assured and accrued bonus (if any) received through their life insurance policy claim (maturity or death benefit). Consequently, this has reduced the attractiveness of non-par high-value policies, which boosted the persistency ratio of life insurers.