Kathmandu. In the backdrop of the Corona pandemic, the main reason behind the surrender of life insurance policies in the Nepali market has been revealed to be economic crisis and ignorance about insurance.
This fact has been revealed in a joint article titled Policyholder Surrender Behavior in the Nepalese Life Insurance Market During the Covid-19 Pandemic by Ravindra Ghimire, Bharat Singh Thapa and Vilas Waikar in Nepal Journal Volume 2, Issue 3. In the research for the questionnaire, 445 insured persons were questioned about the reasons for surrendering insurance policies. Among the 27 reasons for surrendering insurance policies, “financial reasons”, “lack of knowledge about life insurance policies” and “social influence” emerged as the top three reasons.
The findings suggest that financial reasons, especially financial distress, play the most important role in the decision to surrender, the journal said. This is followed by knowledge-related factors, especially lack of understanding about life insurance. Social factors such as family and peer influence also emerged as important. Agent behavior and company-related factors were relatively less important in the main reasons for surrendering insurance policies.
The journal reported that demographic characteristics such as occupation, education, and age were found to have a significant impact on policy surrender decisions, with younger individuals more likely to surrender their policies due to immediate financial pressures.
The survey also highlighted how social and family ties influence individual decisions in Nepali society. The survey results showed that 42 percent of respondents in the first quartile of the survey table cited “family and friend suggestions” as the reason for surrendering their policies. Their response was that the decision to surrender the insurance policy was made on the advice of family and friends.
Nepal’s life insurance industry is facing a significant challenge due to the high surrender rate. The surrender rate has increased significantly during the Corona COVID-19 pandemic. The research collected primary data through a questionnaire survey from 445 insureds who had surrendered insurance policies during the period 2020-2021.
The article divided 27 reasons for surrendering insurance policies into four sections. The role of the agent in surrendering insurance policies is also considered effective. Stating that lack of knowledge about insurance is a major challenge, the questionnaire stated that the responsibility of educating the insured lies primarily with the agent.
