Reserve Bank of India (RBI) has said that rising surrenders and withdrawals of life insurance policies in financial year 2025-26 indicates policyholder dissatisfaction.
RBI in its Financial Stability Report (FSR) 2026 released on 30 June 2026 said, “Surrenders and withdrawals accounted for approximately 38.3% of total pay-outs in 2025-26, going beyond maturity benefits which stood at 36.9%.
“The near parity between surrenders and maturity pay-outs indicates that policyholders are increasingly exiting policies prematurely. Persistently elevated surrender rates could signal policyholder dissatisfaction, product mis-selling or competitive pressure from alternative financial instruments.”
The report said, “This shift has direct implications for asset-liability management (ALM), as early exits disrupt the long-duration assumptions underpinning life insurance investment strategies and can force asset liquidation ahead of schedule.”
The FSR also revealed that life insurance grievances declined from a peak of over 150,000 in 2021-22 to 120,000 in 2025-26, suggesting improvements in market conduct, product suitability and post-sale service. In contrast, grievances in the general insurance sector nearly trebled to 178,000 in 2025-26.
The death claims have normalised to around 8.1%.
The RBI said the sharp rise pointed to weaknesses in claims management, service quality and product communication, warning that unresolved conduct risks could erode policyholder trust, reduce renewal rates and eventually become a financial stability concern.