Parliament Question: Rise in Premature Surrender of Life Insurance Policies

GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF FINANCIAL SERVICES LOK SABHA UNSTARRED QUESTION No. 2526 ANSWERED ON MONDAY, AUGUST 3, 2026/SHRAVANA 12, 1948 (SAKA) Rise in Premature Surrender of Life Insurance Policies 2526. PROF. SOUGATA RAY: SHRI KISHORI LAL: Will the Minister of FINANCE be pleased to state: (a) whether the premature policy surrenders has increased sharply and has overtaken maturity payouts in the life insurance sector in recent years; (b) if so, the details of premature policy surrenders and maturity payouts reported during each of the last five years, insurer-wise; (c) the major reasons identified for the increase in premature policy surrenders, including financial distress, policy mis-selling, affordability issues and inadequate awareness among policyholders; (d) whether the Government has assessed the impact of the rising surrender rate on household savings, long-term financial security and the insurance penetration of the country, if so, the details thereof; (e) whether the Government proposes to strengthen safeguards relating to policy sales, disclosure norms, free-look provisions and surrender value regulations to protect policyholders, if so, the details thereof; and (f) the steps taken by the Government and the insurance regulator to reduce policy lapses and premature surrenders, improve grievance redressal and enhance financial literacy among insurance consumers? ANSWER THE MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI PANKAJ CHAUDHARY) (a) to (b): Surrender and withdrawals as a share of the total benefits paid by life insurers have increased from 32 per cent in FY 2021-22 to 39 per cent in FY 2025-26, indicating an increase in surrender and withdrawal behaviour over the last five years. Also, surrender & withdrawal as a proportion of total benefits has overtaken the maturity benefits paid by life insurance sector. The proportion of maturity benefits in total benefits paid by life insurers has decreased from 48% in FY2021-22 to 37% in the FY2025-26. The following tables provide details of Surrender & withdrawals, both in amount and as proportion of total benefits paid by life insurers: Benefits Paid by Life Insurance Sector (Amount in Rs Crore) Particulars FY22 FY23 FY24 FY25 FY26^ Death claim 60,822 41,457 42,284 47,490 49522 Maturity 2,39,656 2,12,985 2,42,699 2,23,03 269706 Surrender/Withdrawal 1,58,285 1,98,839 2,29,245 2,33,299 280130 Annuities/Pension 18,248 20,696 23,909 26,823 31327 Others 25,086 22,887 38,883 99,526 92473 Total 5,02,097 4,96,865 5,77,021 6,30,171 7,23,158 (^FY 26 data is provisional) Source: IRDAIBenefits Paid by Life Insurance Sector (in %) Particulars FY22 FY23 FY24 FY25 FY26^ Death claim 12% 8% 7% 8% 7% Maturity 48% 43% 42% 35% 37% Surrender/Withdrawal 32% 40% 40% 37% 39% Annuities/Pension 4% 4% 4% 4% 4% Others 5% 5% 7% 16% 13% Total 100% 100% 100% 100% 100% (^FY 26 data is provisional) Source: IRDAI The Insurer-wise break-up of Benefits Paid over the last five years is provided in Annexure. (c) to (d): The insurance sector regulator, 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. Further, IRDAI continuously monitors trends relating to policy surrenders, withdrawals and persistency to assess their implications for insurers' financial soundness, policyholder protection and the overall stability of the insurance sector. 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. However, IRDAI has not undertaken any specific assessment of the impact of rising surrender rates on household savings, long-term financial security, or insurance penetration in the country. (e) to (f): IRDAI has informed that as per the current regulatory provisions, non-linked life insurance savings products provide surrender value after payment of at least one full year’s premium, with the surrender value scale ensuring reasonableness and value for money for all policyholders. Further, to safeguard policyholders' interests and ensure fair surrender benefits, IRDAI has established a comprehensive regulatory framework governing surrender-related matters through the IRDAI (Insurance Products) Regulations, 2024 and Master Circular on Life Insurance Products 2024 which provides detailed guidelines, including provisions relating to surrender values. The following measures are put in place for policyholders by IRDAI to reduce policy lapses and premature surrenders: i. To improve transparency and informed decision-making, insurers are required to provide approved product literature, disclose authorised distribution channels and product features on their websites, and provide a signed Benefit Illustration before conclusion of the sale of life insurance policies. Such Customised Benefit Illustration shall separately disclose policy year-wise Guaranteed Surrender Value (GSV), Special Surrender Value (SSV) and Surrender Values payable. A Customer Information Sheet (CIS) has been mandated for all life insurance policies to increase customer awareness about policy benefits. ii. As a part of standardized post-sale process all life insurance policyholders are allowed a free-look period of 30 days to cancel the policy and obtain a refund of premiums after deduction of proportionate risk premium for the coverage period, medical examination expenses (if any), and stamp duty charges.iii. All the non-linked individual life insurance savings products are required to offer facility of policy loan, enabling policyholders to meet liquidity requirements, so that policyholders have access to funds without needing to lapse or surrender policies. iv. Partial withdrawals are permitted under pension products to cover significant life expenses such as education, housing, or medical treatments. v. Thus, non-linked life insurance savings products acquire surrender value after payment of one full year’s premium; insurers are required to ensure reasonable surrender values, provide policy loan facilities in eligible savings products, permit partial withdrawals under pension products for specified life events, and offer flexible premium payment terms to improve affordability and policy persistency. In addition, IRDAI has prescribed norms governing advertisements to ensure that all communications relating to insurance products are fair, accurate and not misleading, thereby enabling prospective policyholders to make informed decisions. These measures are complemented by continuous supervisory oversight through regulatory returns, inspections, audits, market intelligence and other supervisory mechanisms. The IRDAI (Protection of Policyholders' Interests, Operations and Allied Matters of Insurers) Regulations, 2024 and the relevant Master Circulars require every life insurer to have a Board-approved policy for assessing product suitability and recommending products based on the needs of the prospect. Insurers and distribution channels are responsible for ensuring fair conduct during solicitation, preventing mis-selling and misleading sales practices, providing periodic training to sales personnels and intermediaries, obtaining customer feedback, strengthening financial underwriting to assess the prospect's ability to sustain premium payments etc. Policyholders also have access to an effective grievance redressal mechanism through insurers and the Insurance Ombudsman. *****Annexure Annexure referred to in reply to part (a) to (b) of Lok Sabha Un-starred Question No. 2526 for answer on 03.08.2026 regarding “Rise in Premature Surrender of Life Insurance Policies” raised by Hon'ble Members of Parliament Prof. Sougata Ray and Shri Kishori Lal. (Amount in Rs. Crore) FY2025-26(Provisional) FY2024-25 Sr Insurer Claims Annuities/ Annuities/ Other No Claims by Surrenders/ Claims by Claims by Surrenders/ by Pension Other benefits Total Pension benefi Total Maturity Withdrawal Death Maturity Withdrawal Death payment payment ts Acko Life Insurance 1 24 - - 0 0 24 13 - - 0 0 12.66 Limited Aditya Birla Sun Life 2 834 484 86 9,797 1,397 12,598 725 422 64 7,538 954 9,703.87 Insurance Co. Ltd. AGEAS FEDERAL LIFE 3 182 351 6 1,037 527 2,102 161 240 5 813 602 1,822.05 INSURANCE CO LTD Aviva Life Insurance 4 111 684 51 566 53 1,464 99 390 51 517 56 1,113.74 Company India Ltd. Bajaj Life Insurance 5 1,821 2,605 147 8,761 1,033 14,367 1,756 2,009 107 7,777 826 12,475.40 Limited Bandhan Life Insurance 6 86 117 0 138 127 467 67 69 0 225 59 419.74 Limited Bharti AXA Life Insurance 7 226 281 - 763 686 1,956 199 227 - 638 424 1,488.84 Co. Ltd. Canara HSBC Life 8 509 842 63 3,103 64 4,582 405 452 59 1,503 2,642 5,060.89 Insurance Co. Ltd. CREDITACCESS LIFE 9 154 - - 0 - 154 42 - - 0 - 41.84 INSURANCE LIMITED Edelweiss Life Insurance 10 49 90 4 567 226 937 48 76 4 562 162 852.94 Company Limited Exide Life Insurance 11 - - - - - - - - - - - - Company Limited Future Generali India Life 12 62 233 2 370 277 943 63 130 1 354 837 1,385.17 Insurance Co. Ltd. Go Digit Life Insurance 13 352 - - 8 42 401 138 - - 0 18 155.81 Limited HDFC Life Insurance 14 4,494 8,399 1,879 15,741 4,846 35,359 4,950 8,593 1,610 14,052 7,706 36,910.93 Company LimitedICICI Prudential Life 15 3,572 13,202 807 27,340 1,288 46,208 3,360 9,477 720 30,760 1,154 45,471.09 Insurance Co. Ltd. IndiaFirst Life Insurance 16 450 1,243 11 2,153 340 4,197 611 725 6 1,998 302 3,641.35 Co. Ltd. IndusInd Nippon Life 17 Insurance Company 222 1,220 14 1,767 1,271 4,494 212 1,028 13 1,481 789 3,522.87 Limited Kotak Mahindra Life 18 1,747 2,455 184 3,309 1,175 8,869 1,832 2,575 147 2,811 945 8,310.80 Insurance Company Ltd Life Insurance Corporation 19 24,885 2,18,507 25,641 1,56,731 61,983 4,87,747 24,419 1,81,978 22,097 1,30,905 53,879 4,13,278.77 of India Max Life Insurance Co. 20 1,767 1,960 369 9,590 6,407 20,094 1,456 1,694 255 6,943 6,678 17,025.80 Ltd. PNB MetLife India 21 679 2,595 94 2,210 933 6,511 641 1,666 70 2,486 802 5,664.69 Insurance Co. Ltd. Pramerica Life Insurance 22 241 247 0 292 20 800 251 119 0 233 17 619.49 Limited Sahara India Life 23 - - - - - - - - - - - - Insurance Co. Ltd. SBI Life Insurance Co. 24 4,778 11,431 1,756 29,294 6,362 53,620 4,110 9,438 1,428 16,308 17,046 48,329.50 Ltd. Shriram Life Insurance Co. 25 709 632 16 299 250 1,906 560 388 9 249 142 1,347.55 Ltd. Star Union Dai-ichi Life 26 448 339 27 952 586 2,351 442 326 26 687 1,417 2,897.94 Insurance Co. Ltd. Tata AIA Life Insurance 27 1,119 1,791 171 5,341 2,582 11,005 929 1,011 150 4,458 2,069 8,617.14 Co. Ltd. Total 49,522 2,69,706 31,326 2,80,130 92,473 7,23,158 47,490 2,23,034 26,822 2,33,299 99,526 6,30,171 Source: IRDAI(Amount in Rs. Crore) FY2023-24 FY2022-23 Sr Insurer Claims Annuities/ Annuities/ no Claims by Surrenders/ Other Claims by Claims by Surrenders/ Other by Pension Total Pension Total Maturity Withdrawal benefits Death Maturity Withdrawal benefits Death payment payment 1 Acko Life Insurance Limited 1 - - 0 - 1 - - - - - - Aditya Birla Sun Life 2 623 694 40 5,887.46 498 7,742 770 864 30 4,117 -9 5,772 Insurance Co. Ltd. AGEAS FEDERAL LIFE 3 93 301 5 895.40 517 1,812 92 333 4 541 390 1,361 INSURANCE CO LTD Aviva Life Insurance 4 82 208 73 578.22 64 1,006 63 307 54 589 86 1,100 Company India Ltd. 5 Bajaj Life Insurance Limited 1,704 2,325 69 7,411.63 501 12,012 1,620 2,100 40 8,151 462 12,372 Bandhan Life Insurance 6 42 32 0 264.25 72 409 37 10 0 253 60 361 Limited Bharti AXA Life Insurance 7 195 140 - 446.81 337 1,119 183 105 - 328 244 859 Co. Ltd. Canara HSBC Life 8 348 259 62 1,571.34 911 3,151 321 171 50 1,474 1,063 3,079 Insurance Co. Ltd. CREDITACCESS LIFE 9 6 - - - - 6 - - - - - - INSURANCE LIMITED Edelweiss Life Insurance 10 49 18 4 577.93 59 708 48 6 4 306 71 435 Company Limited Exide Life Insurance 11 - - - - - - - - - - - - Company Limited Future Generali India Life 12 64 69 1 322 410 866 68 54 0 275 260 657 Insurance Co. Ltd. Go Digit Life Insurance 13 22 - - - - 22 - - - - - - Limited HDFC Life Insurance 14 4,143 8,621 1,319 14,517 9,242 37,841 4,333 7,238 1,016 21,703 3,355 37,645 Company Limited ICICI Prudential Life 15 3,078 5,159 642 29,975 892 39,746 2,337 3,706 538 23,552 655 30,789 Insurance Co. Ltd. IndiaFirst Life Insurance Co. 16 650 278 3 2,003 341 3,276 555 370 2 2,672 131 3,731 Ltd. IndusInd Nippon Life 17 193 885 11 1,415 759 3,263 192 610 10 1,013 624 2,449 Insurance Company LimitedKotak Mahindra Life 18 1,534 2,121 109 2,632 869 7,265 1,345 1,934 75 2,167 845 6,367 Insurance Company Ltd Life Insurance Corporation 19 22,625 2,08,136.42 20,106 1,33,803 1,278 3,85,949 23,423 1,85,044 17,892 1,11,896 1,057 3,39,312 of India 20 Max Life Insurance Co. Ltd. 1,189 1,317 152 5,907 4,752 13,318 1,154 1,058 77 6,037 1,651 9,976 PNB MetLife India Insurance 21 608 978 69 2,252 644 4,551 566 488 56 1,305 487 2,903 Co. Ltd. Pramerica Life Insurance 22 203 114 0 241 8 565 139 76 0 223 8 446 Limited 23 Sahara India Life Insurance - 5 81 - 26 26 138 Co. Ltd. 24 SBI Life Insurance Co. Ltd. 3,174 9,935 1,098 13,760 14,757 42,724 2,883 7,169 752 9,067 10,219 30,090 Shriram Life Insurance Co. 25 458 186 7 193 94 937 393 154 6 150 62 764 Ltd. Star Union Dai-ichi Life 26 409 369 26 599 393 1,796 352 498 26 453 136 1,464 Insurance Co. Ltd. Tata AIA Life Insurance Co. 27 792 552 111 3,993 1,487 6,935 577 608 62 2,543 1,005 4,795 Ltd. Total 42,284 2,42,699 23,909 2,29,245 38,883 5,77,021 41,457 2,12,985 20,696 1,98,839 22,887 4,96,865 Source: IRDAI(Amount in Rs. Crore) FY2021-22 Sr no Insurer Claims by Claims by Annuities/ Other Surrenders/Withdrawal Total Death Maturity Pension payment benefits 1 Acko Life Insurance Limited - - - - - - 2 Aditya Birla Sun Life Insurance Co. Ltd. 796 1,488 23 4,205 244 6,754 3 AGEAS FEDERAL LIFE INSURANCE CO LTD 156 338 3 319 300 1,116 4 Aviva Life Insurance Company India Ltd. 115 266 50 653 106 1,189 5 Bajaj Life Insurance Limited 2,010 1,960 23 4,329 488 8,810 6 Bandhan Life Insurance Limited 121 34 0 206 30 391 7 Bharti AXA Life Insurance Co. Ltd. 293 59 - 233 186 772 8 Canara HSBC Life Insurance Co. Ltd. 495 242 37 1,463 407 2,644 9 CREDITACCESS LIFE INSURANCE LIMITED - - - - - - 10 Edelweiss Life Insurance Company Limited 97 4 2 191 25 320 11 Exide Life Insurance Company Limited 353 779 11 747 154 2,044 12 Future Generali India Life Insurance Co. Ltd. 144 67 0 228 121 561 13 Go Digit Life Insurance Limited - - - - - - 14 HDFC Life Insurance Company Limited 4,334 9,003 692 8,968 8,155 31,151 15 ICICI Prudential Life Insurance Co. Ltd. 3,601 4,155 416 20,407 568 29,145 16 IndiaFirst Life Insurance Co. Ltd. 784 132 1 2,980 112 4,009 17 IndusInd Nippon Life Insurance Company Limited 314 962 9 1,258 556 3,099 18 Kotak Mahindra Life Insurance Company Ltd 1,675 2,053 48 1,441 601 5,818 19 Life Insurance Corporation of India 35,720 2,05,527 16,257 95,118 816 3,53,438 20 Max Life Insurance Co. Ltd. 1,964 966 31 4,774 1,538 9,27321 PNB MetLife India Insurance Co. Ltd. 1,083 326 47 1,152 394 3,001 22 Pramerica Life Insurance Limited 236 60 0 204 15 515 23 Sahara India Life Insurance Co. Ltd. 13 71 - 28 29 141 24 SBI Life Insurance Co. Ltd. 4,736 9,725 545 7,102 9,130 31,238 25 Shriram Life Insurance Co. Ltd. 523 145 3 140 59 870 26 Star Union Dai-ichi Life Insurance Co. Ltd. 484 569 24 392 211 1,680 27 Tata AIA Life Insurance Co. Ltd. 775 726 28 1,748 841 4,118 Total 60,822 2,39,656 18,248 1,58,285 25,086 5,02,097 Source: IRDAI