Life Insurance Corporation of India (LIC) reported that its five-year policy persistency ratio fell to 46.88% by policy count in FY26. This metric, which tracks how many customers keep their policies active for at least five years, has reached its lowest level in five years. Investors are monitoring this trend as it reflects challenges in long-term customer retention amidst a strategic shift in the insurer's product mix.
Life Insurance Corporation of India (LIC) is facing a decline in long-term customer loyalty as its five-year policy persistency ratios hit a five-year low in FY26. The 61st-month persistency ratio, which measures the percentage of policies remaining active after five years, dropped to 46.88% based on the number of individual policies. This is a decline from approximately 50% in FY22. When measured by premium value, the ratio stood at 59.31% for the same period, down from over 63% in FY25.
In the life insurance industry, persistency ratios are vital for gauging the long-term health of an insurer’s book. While a 13th-month ratio tracks retention after one year, the 61st-month ratio is considered a more meaningful indicator of customer stickiness, as insurance contracts are typically designed to last for decades.
Strategic Shift and Product Mix Impact
Management has attributed the decline partly to shifts in the company's product portfolio. During the Q4FY26 earnings call, CEO R. Doraiswamy noted that the phasing out of certain pandemic-era products and a changing mix of sold policies have influenced these numbers. The insurer is currently pivotting toward non-participating products, which do not share surplus profits with policyholders. In FY26, LIC's individual non-participating Annualised Premium Equivalent (APE) grew by 44% to ₹15,214 crore.
While non-participating products can offer better profit margins for the insurer, they may also exhibit different retention behaviors compared to traditional savings-oriented insurance plans. Industry observers point out that the push for higher-value, non-participating products often requires different engagement strategies to ensure policyholders continue their premiums over the long term.
Operational Challenges and Future Monitoring
Data from the insurer also indicates that the total count of individual policies in force has seen pressure, moving from roughly 280 million in FY21 to 254 million by the end of FY26. This trend suggests that the rate at which existing policies are surrendered or lapse is outpacing the addition of new ones in specific segments.
To counter this, LIC has integrated persistency targets into its performance-linked incentives and Key Performance Indicators (KPIs) for staff. The company has also initiated enhanced customer outreach and loyalty programs. Despite the five-year decline, there is a positive sign in the 13th-month persistency ratio, which improved to 64.87% in FY26 from over 60% in FY21, suggesting that early-stage customer acquisition remains resilient.
Investors may track whether these corrective measures succeed in stabilizing long-term retention in coming quarters. The primary monitorables include the trend in non-participating product growth versus total policy lapses, and whether the insurer can reverse the decline in the overall count of individual policies in force.