Glossary
Persistency ratio
M5.03Also called persistency, 13th month persistency.
The proportion of policies still in force after a given period, quoted at the thirteenth month, the twenty-fifth, and so on.
Thirteenth-month persistency above 85% is healthy for an Indian life insurer.
The ratio is the cleanest available measure of whether policies were sold to people who wanted them. A sliding figure means customers are lapsing, which destroys the value assumed at the point of sale and usually points at mis-selling in the distribution channel.
Embedded value assumes a persistency level. If actual persistency runs below it, the reported value is overstated and the correction arrives as an assumption change.
Watch the thirteenth month. Everything later follows it.
Where this is taught
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