Insurance Policy Surrenders Decline in Current Fiscal Year

The surrender of life insurance policies declined in the current fiscal year (FY 2025/26) amid tighter regulation and growing public awareness, according to data released by the Nepal Insurance Authority (NIA).

Data show that by mid-December of the current fiscal year, 37,149 policyholders had surrendered insurance policies worth Rs 5.69 billion. In the same period of the previous fiscal year, 45,060 policies valued at Rs 6.72 billion had been surrendered.

Compared to the previous year, the number of surrendered policies fell by 17.56 percent, while the surrendered amount declined by 6.80 percent, the NIA said.

Insurance surrender refers to the termination of a policy before the completion of its stipulated term, usually when policyholders fail to pay premiums as required under the policy conditions.

Following the Covid-19 pandemic, a slowdown in economic activity had led to a rise in policy surrenders. Unhealthy competition among insurance companies had also contributed to the trend, prompting the regulator to tighten oversight.

Three years ago, the NIA issued the Insurance Policy Directive 2022, strengthening provisions from policy issuance to surrender. The directive requires insurers to prepare detailed documents, including market research reports, cost-benefit analyses, risk identification and mitigation plans, and marketing strategies before issuing new policies.

The directive also allows policy surrender and loans against policies only after premiums for at least three years have been paid and the policy has completed three years from commencement.

Sushil Dev Subedi, executive director of the Nepal Insurance Authority, said regulatory tightening and increased public awareness have helped reduce premature surrenders. “We have made policy surrender stricter,” he said. “People are increasingly aware that surrendering a policy early leads to financial loss.”

According to the NIA, life and micro-life insurance companies had 16.17 million active policies as of mid-December in the current fiscal year, up 16.83 percent from the same period last year.

During the period, insurers’ total premium collection also rose by 19.10 percent to Rs 78.77 billion, the NIA said.