Insurance Policy Surrenders Decline by Nearly 20% in First Seven Months of Current FY

The surge in policy surrenders that followed the COVID-19 pandemic has reversed, with a drop in the number of life insurance policies being lapsed in the first seven months of the current fiscal year (FY 2025/26), according to the Nepal Insurance Authority (NIA).

Data released by the Nepal Insurance Authority revealed that improved economic activities and stricter regulatory enforcement by the authority resulted in the declining trend in policy surrenders.

Data up to the Nepali month of Magh (mid-February) shows that a total of 59,672 insurance policies were surrendered, amounting to Rs 6.95 billion.  This represents a 19.07 percent decline in the total sum assured and a 4.56 percent drop in the number of policies surrendered compared to the same period last year.

During the corresponding period last year, 62,523 policies worth Rs 8.59 billion were surrendered.

Surrendering a policy refers to terminating it before the maturity date. Policyholders are required to pay the premium as per the policy terms. Failing to do so and withdrawing the policy constitutes a surrender.

The trend of surrendering policies had escalated following the economic slowdown triggered by the COVID-19 pandemic. Additionally, the authority observed that unhealthy competition among companies and indiscriminate selling by agents also contributed to high surrender rates, prompting stricter oversight.

To address this, the authority introduced the Insurance Policy Directive 2079, tightening provisions from policy issuance to surrender. The directive mandates insurers to prepare market research reports, cost-benefit analyses, risk identification and mitigation plans, and marketing strategies before launching a policy. It also stipulates that policies can only be surrendered or used as collateral for loans after three full years of premiums have been paid and the policy has been in effect for three years.

By mid-February of the current fiscal year, 1.226 million policies had matured, with a total maturity amount of Rs 37.70 billion. During the same period last fiscal year, 1.234 million policies worth Rs 36.62 billion had matured.

Sushil Dev Subedi, Executive Director of the Nepal Insurance Authority, stated that the combination of regulatory strictness and increased public awareness has led to the decline in surrenders. He also noted that the improvement in overall economic activities has positively impacted the insurance business.

According to the authority, life and micro-life insurance companies issued 427,190 new policies by mid-February. The total number of active life insurance policies now stands at 1.62 million, marking a 14.57 percent increase compared to the same period last year.