Persistency ratio

The proportion of policies still in force after a given period, quoted at the thirteenth month, the twenty-fifth, and so on.

Thirteenth-month persistency above 85% is healthy for an Indian life insurer.

The ratio is the cleanest available measure of whether policies were sold to people who wanted them. A sliding figure means customers are lapsing, which destroys the value assumed at the point of sale and usually points at mis-selling in the distribution channel.

Embedded value assumes a persistency level. If actual persistency runs below it, the reported value is overstated and the correction arrives as an assumption change.

Watch the thirteenth month. Everything later follows it.