Surrender Payouts Overtake Maturity Benefits as More Indians Exit Life Insurance Policies Early
Summarized by AI; it may make mistakes. Check important info
Summarized by AI; it may make mistakes. Check important info
Premature exits from life insurance policies are on the rise, with surrender and withdrawal payouts overtaking maturity benefits for the first time as the largest component of total benefits paid by India’s life insurance sector.
Data tabled in the Lok Sabha by the Union Ministry of Finance shows that surrender and withdrawal payouts accounted for 39% of total benefit payouts in provisional figures for FY26, up from 32% in FY22. Over the same period, the share of maturity benefit payouts declined from 48% to 37%. Death claims constituted 7% of total benefits in FY26, while annuities and pensions accounted for 4%.
In absolute terms, the sector paid ₹7,23,158 crore in total benefits during FY26 (provisional), compared with ₹5,02,097 crore in FY22. Surrender and withdrawal payouts rose to ₹2,80,130 crore, surpassing maturity benefit payouts of ₹2,69,706 crore. Death claims stood at ₹49,522 crore, annuity and pension payments at ₹31,327 crore, while other benefits totalled ₹92,473 crore. The FY26 figures remain provisional, according to the Insurance Regulatory and Development Authority of India (IRDAI).
Why are more policyholders surrendering their policies?
According to IRDAI, the increase in premature policy surrenders is being driven by a combination of product and consumer-related factors. These include mis-selling, unsuitable product recommendations, unmet policyholder expectations, inadequate understanding of policy features, premium affordability issues, and changes in personal financial circumstances.
While the regulator monitors policy persistence to assess insurers’ financial health, it has not conducted a dedicated study on the impact of rising surrenders on overall household savings.
Measures to reduce early exits
To strengthen consumer protection and improve policy retention, IRDAI has introduced several safeguards. These include a 30-day free-look period, Customer Information Sheets (CIS), and year-wise surrender value illustrations before policy purchase.
The regulator has also mandated minimum surrender values after payment of one full year’s premium, required policy loan facilities on non-linked savings products, permitted partial withdrawals for specified life events under pension plans, and enforced board-approved product suitability norms to reduce mis-selling and ensure policies better match customer needs.
