With the economic slowdown impacting the income of general people, the insured are increasingly resorting to surrendering life insurance policies in recent years. According to life insurance companies, of the total policies they've sold, nine percent have been surrendered. Currently, there are 18 life insurance companies operating in Nepal. The companies have collected a total of Rs 71.65 billion in insurance premiums in the first six months of the current fiscal year 2022/23. However, insurers have surrendered Rs 6.08 billion during this period. As per the statistics of the Nepal Insurance Authority (NIA), 43,715 insurance policies were surrendered in the last six months. Generally, people buy life insurance for a certain period to get covered for the period. As per existing arrangements, the insured can surrender the policy they bought before maturity and take back the amount they paid to the insurers as premiums. Now, the trend of surrendering the policy before the maturity period is increasing, according to insurance companies. People surrendering the policy are paid the premium and bonus amount up to the date of surrender in a lump sum.

Last year, NIA changed the arrangements barring buyers of life insurance policies from surrendering before settling the premium payments for three years. In the new rule, insurers cannot issue general life insurance policies for less than five years of maturity.

NIA data shows 63,331 policies worth Rs 9.88 billion were surrendered in FY 2020/21. While the authority introduced a new provision to control the cancellation of the policies in FY 2021/22, the same year saw the number of policies surrendered increasing to 81,860 amounting to Rs 12.18 billion. NIA officials estimate if the policy surrender increases at this rate, the number will go up further in the current fiscal year. Insurers say that policy surrenders are basically due to the ongoing economic slump which has hit the income of general people. According to them, high-interest rates, and rising inflation have hit the common people hard, affecting their purchasing power. In most cases, the insured surrenders a life insurance policy to get rid of the burden of the premium amount to be paid to the insurers. An increase in the surrender rate this year could be due to an increased financial burden to the insured caused by increased interest rates of banks and soaring consumer prices, said analysts. According to Manoj Lal Karna, CEO of Union Life Insurance, people are surrendering policies to solve their financial problems. "The growth of the insurance business has been held back in the current fiscal year due to the economic slowdown. We are observing a surge in policy surrender," said Karna. According to him, there has been growth in the number of policies lapse. Policy lapse happens when people do not pay the installment of the premium within the specified time. The government records show that a total of 41 percent of the population now has access to insurance services. However, the case of surrendering the policies is also on the rise.