More than 2.3 crore life insurance policies were surrendered by policyholders before their maturity in 2021-22 compared to 69.78 lakh policies that were closed prematuredly the previous year, according to a report by The Indian Express.
The three-fold rise in the number of policies surrendered prematurely in 2021-22 indicate the financial distress during the second year of the Covid-19 pandemic.
Amid the Covid-19 outbreak, the Union government imposed a nationwide lockdown on March 24,2020. Owing to this, several people across the country lost their jobs, while others faced salary cuts. These unprecedented circumstances forced people to surrender their non-matured life insurance policies to arrange for funds. More number of people resorted to selling their insurance policies prematuredly the following year as well to cope with financial distress.
According to the report, 16 out of 24 insurers witnessed an increase in premature selling of policies in 2021-22 compared to the previous year.
The average surrender value paid to policyholders in 2021-22 was Rs 62,552, less than half the average surrender value of Rs 1,67,427 paid in 2020-21.
For Life Insurance Corporation policyholders, the average value of over 2.12 crore policies surrendered during 2021-22 was just Rs 43,306. However, in the previous year, LIC policyholders surrendered 53.35 lakh policies and the average surrender value paid to them was Rs 1,49,997.