Early Withdrawals Overtake Maturity Benefits: Life insurance data shared in the Lok Sabha shows a clear shift in how people are using their policies. More policyholders are now taking money out early instead of waiting for the policy to finish.
According to Minister of State for Finance Pankaj Chaudhary, surrenders and withdrawals made up 32% of total benefits paid by life insurers in FY22. That number went up to 39% in FY26. In the same period, maturity benefits fell from 48% to 37% of total payouts.
The money numbers show the same trend. Surrender and withdrawal payouts rose to ₹2.80 trillion in FY26 from ₹1.58 trillion in FY22. Maturity payouts also went up, but at a slower pace, from ₹2.40 trillion to ₹2.70 trillion. Death claims also increased a little, reaching ₹49,522 crore in FY26 from ₹47,490 crore in FY25, although they were still below the FY22 level.
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Why People are Quitting Policies early
The minister said the insurance regulator, IRDAI, sees many reasons behind early exits. These include products that do not suit the buyer, premiums that become hard to pay, policyholders not getting what they expected, mis-selling, low awareness, poor understanding of insurance products, and changes in family or money situations. In simple words, many people are stopping because the policy no longer feels useful or affordable.
Chaudhary also said IRDAI has not done a separate study on how rising surrender rates may affect household savings, long-term financial safety, or insurance reach in the country. Even so, the regulator keeps watching surrender trends, withdrawals, and persistency closely. It can then take action when needed to improve policyholder protection, product design, disclosures, risk control, and customer awareness.
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What the Rules say?
The surrender rules matter a lot for policyholders. IRDAI says some non-linked life insurance savings products can get surrender value after one full year’s premium is paid. New surrender value rules also came in from October 1, 2024, to give policyholders better exit value than before. That means people who leave a policy early may now get more back than in the past.
Who is Affected most?
The government data also shows that LIC was the biggest payer of surrender money in FY26 at ₹1.57 trillion. Other big insurers also saw large early-exit payouts, including SBI Life at ₹29,294 crore, ICICI Prudential Life Insurance at ₹27,340 crore, and HDFC Life Insurance at ₹15,741 crore.
