Increase in Surrender and Withdrawal Rates in Life Insurance Benefits

Rising Trends in Life Insurance Surrender and Withdrawals

New Delhi, August 3 - The government informed Parliament on Monday that the share of surrenders (premature policy closures) and withdrawals in the total benefits provided by life insurance companies has risen from 32% in 2021-22 to 39% by 2025-26. In a written response to a question in the Lok Sabha, Minister of State for Finance Pankaj Chaudhary noted that this trend indicates an increase in surrenders and withdrawals over the past five years.

He further explained that the proportion of maturity benefits in the total benefits offered by life insurance companies has decreased from 48% in 2021-22 to 37% in 2025-26. The insurance regulator, IRDAI, has identified several reasons for policy surrenders and early cancellations, including the mismatch of purchased products, inability to afford premiums, unmet expectations of policyholders, mis-selling, lack of understanding of insurance products, and changes in the financial circumstances of policyholders.

To safeguard the interests of policyholders and ensure fair surrender benefits, the Insurance Regulatory and Development Authority of India (IRDAI) has established a comprehensive regulatory framework through the 'IRDAI (Insurance Products) Regulations, 2024' and the 'Master Circular 2024' on life insurance products, which provides detailed guidelines related to surrender values.