Generally, people buy life insurance policies to get covered for certain term periods. 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 9.88bn were surrendered in FY 2020/21. While the regulator introduced a new provision to control the premature closure of policies in FY 2021/22, the same year saw the number of policies surrendered increasing to 81,860 amounting to Rs 12.18bn. NIA officials estimate if the policy surrender increases at this rate, the number will go up further in the current fiscal year. According to Raju Raman Poudel, Executive Director of NIA, policy surrenders are increasing basically due to the ongoing economic slump which has hit the income of the general people. According to him, 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, say analysts. The CEOs of life insurance companies agree with Poudel. According to them, the growth of the insurance business has been held back in the current fiscal year due to the economic slowdown and the surge in surrender of policies is a result of the downturn. Along with policy surrenders, 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. Nevertheless, the surge in surrender of policies is also ringing alarm bells in the insurance sector. Month-wise policy surrender
| Month | Surrender amount (in Rs) | Surrender policy (numbers) |
| Shrawan | 1.152 billion | 8,422 |
| Bhadra | 1.148 billion | 8,052 |
| Ashoj | 773.2 million | 6,063 |
| Kartik | 1.119 billion | 6,746 |
| Mangsir | 1.016 billion | 7,650 |
| Poush | 874.3 million | 6,782 |
| Magh | 1.327 billion | 9,839 |
| Falgun | 1.082 billion | 8,939 |
| Chaitra | 1.180 billion | 9,358 |
| Baisakh | 1.308 billion | 10,797 |
| Total | 10.984 billion | 82,648 |
