Premature life policy exits surpass maturity payouts, shows govt data

Surrenders and withdrawals accounted for 39% of total benefits paid by life insurers in FY26, overtaking maturity payouts amid rising early exits from long-term policies

Premature surrender and withdrawal of life insurance policies have overtaken maturity payouts over the last five years as more policyholders exit long-term policies before the completion of their tenure, according to data presented by Minister of State for Finance Pankaj Chaudhary in the Lok Sabha on Monday.

 

“Surrenders and withdrawals as a share of the total benefits paid by life insurers have increased from 32 per cent in FY22 to 39 per cent in FY26,” Chaudhary said in a written reply to a question in the lower house of Parliament. “The proportion of maturity benefits in total benefits paid by life insurers has decreased from 48 per cent in FY22 to 37 per cent in FY26,” he added.

   

In absolute terms, surrender and withdrawal payouts rose to ₹2.80 trillion in FY26 from ₹1.58 trillion in FY22, while maturity payouts increased to ₹2.70 trillion from ₹2.40 trillion over the same period.

 

“The insurance sector regulator, Insurance Regulatory and Development Authority of India (Irdai), has informed that policy surrenders and early exits are influenced by multiple factors, including lack of suitability of the product purchased, lack of affordability of premium, non-fulfilment of policyholder expectations, mis-selling, lack of policyholder awareness and understanding of insurance products, and changes in the financial circumstances of policyholders,” the minister said.

 

State-run Life Insurance Corporation of India (LIC) accounted for ₹1.57 trillion in surrenders in FY26, while other players such as SBI Life (₹29,294 crore), ICICI Prudential Life Insurance (₹27,340 crore), and HDFC Life Insurance (₹15,741 crore) also recorded high early-exit figures.

 

Irdai continuously monitors trends in policy surrenders, withdrawals, and persistency to assess their implications for insurers' financial soundness, policyholder protection, and the overall stability of the insurance sector, Chaudhary said. “Based on such monitoring, appropriate supervisory and regulatory measures are undertaken, wherever considered necessary, to strengthen policyholder protection, improve product design and disclosures, promote sound risk management, governance practices, and policyholders' awareness,” the minister said.