Insurance
Persistency
The share of policies still in force and paying after a set time.
Facts checked against sources onWhat does Persistency mean?
Persistency is the share of insurance policies, mostly life and savings policies, that customers keep paying after a set period. It is usually measured by count or by premium at the 13th month, and again at the 25th, 37th, 49th and 61st months; in India the insurance regulator IRDAI requires insurers to disclose these ratios. Example: of 1,000 policies sold in January, 820 pay their 13th-month premium, so 13th-month persistency is 82 percent. Low persistency hurts because the insurer paid high commission up front and loses the later premiums that were meant to repay it. It is often a sign of mis-selling.
Where does it come up in case interview prep?
- How insurance works and makes moneyLesson in Insurance: life, property and casualty, and health
- Insurance unit economics: the combined ratio at workLesson in Insurance: life, property and casualty, and health
- Insurance: players, trends, regulation, and how to crack the casesLesson in Insurance: life, property and casualty, and health
Related terms
- Churn and retentionThe share of customers who leave in a period, and the share who stay.
- CLV (customer lifetime value)The profit a customer is expected to bring over the whole relationship.
- CAC (customer acquisition cost)What it costs, on average, to win one new customer.
- Loss ratioClaims as a share of premiums earned.
- Expense ratio (insurance)An insurer's costs of selling and running policies as a share of premiums.
- Combined ratioLoss ratio plus expense ratio. Below 100 percent means an underwriting profit.
- ReinsuranceInsurance for insurance companies.
- Float (insurance)Premiums an insurer holds and invests before it pays claims.
Learn it in context
See Persistency at work in a lesson from Insurance: life, property and casualty, and health, with checks as you go.
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