Surrenders now account for 39% of life insurance benefits paid, overtaking maturity payouts. IRDAI blames mis-selling, affordability, and unmet expectations but has not assessed the impact on household savings.
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Surrender and withdrawal payments now make up 39% of all benefits paid by life insurers, up from 32% in fiscal 2022, according to data tabled in Parliament on Monday. The share of maturity benefits has fallen to 37% from 48% over the same period.
Minister of State for Finance Pankaj Chaudhary, in a written reply in the Lok Sabha, said the figures show rising surrender and withdrawal behavior across the industry over the last five years.
The insurance regulator IRDAI told the government that policy surrenders and early exits are driven by several factors: products that do not match policyholder needs, premium affordability issues, unmet expectations, mis-selling, low financial literacy, and changes in personal finances.
IRDAI monitors surrender trends and persistency ratios to assess their impact on insurers' financial soundness and policyholder protection. Based on that surveillance, the regulator adjusts product design rules, disclosure requirements, risk-management standards, and policyholder awareness programs, Chaudhary said.
The regulator has not assessed how rising surrenders affect household savings, long-term financial security, or insurance penetration in India, he added.
Under current rules, non-linked life savings products must offer a surrender value after at least one full year's premiums. The surrender-value scale is designed to be reasonable and to give policyholders fair value, IRDAI told the government.
The regulator has codified surrender-related rules through the IRDAI (Insurance Products) Regulations, 2024 and a Master Circular on Life Insurance Products 2024, which set out detailed guidelines on surrender values.
A separate parliamentary reply addressed surveyor management at National Insurance Company Ltd. Chaudhary said surveyor allocation follows a board-approved policy. Work assignments to an empanelled surveyor are suspended if a complaint of corruption, fraud, or serious misconduct is received, in line with the standard operating procedure for external fraud.
In one case, a surveyor's work allocation was suspended from June 2025 pending the outcome of an investigation. The suspension is temporary until the probe finishes, Chaudhary said. No other representations have been received about surveyors being denied professional work because of pending administrative closures at NICL.
The surrender data raises questions about product suitability and policyholder retention across India's life insurance sector. Lapses and early exits erode the long-term savings pool that the industry is designed to build. IRDAI told the government it continuously monitors these trends to assess their implications for insurers' balance sheets and the overall stability of the sector.
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