INFLUENCE OF DEMOGRAPHIC AND HOUSEHOLD FACTORS ON SURRENDER OF LIFE INSURANCE POLICIES IN INDIA

Abstract

In this research paper, we examined the influence of demographic and household factors on adecision to surrender a life insurance policy before the end of the policy term. As per thehandbook on Indian Insurance Statistics 2020-21, by the 5 th year of policy sale, only 4 out of 24 life insurers could retain half of their policies. One of the reasons for this low persistenceis the increased surrender of policies. Surrendering a policy means the policyholdercancelling the policy and agreeing to take the cash value/surrender value accrued to thepolicy over time and forgoing the death benefit or maturity benefit. Generally, a policyacquires surrender value after the policyholder has paid the premiums continuously for threeyears. A survey of randomly selected 537 policyholders was conducted using a structuredquestionnaire to examine the influence of demographic and household factors on a decisionto surrender a life insurance policy. Results of our study suggest that demographic andhousehold factors influence the decision to surrender a life insurance policy. Marital statusand occupation are statistically significant predictors of the decision to surrender a policy.

Keywords

• life insurance
• policy holder
• surrender
• persistency
• maturity
• lapsation
• logit model