Lapsation- An Impediment to the Growth of Unit Linked Insurance Policies

Abstract — Early lapse of life insurance policies is one of the serious issues in the pace of Life Insurance market. In recent timesIRDA report witnesses twenty percentages of lapsed policies in the first year of the initiation of the ULIP. After the emergence of private sector in India, Life Insurance Industry had a significant growth that paves the way for competition as well as introduction of innovative policies with varieties of features. Early lapsation costs the Life insurer the major part of the first year’s premium, high degree of financial losses for policyholders and general dissatisfaction over Unit Linked Policies. As half million people needs to be covered with insurance in India, lapsation and existing policy holders ’ dissatisfaction over products will make difficult for the insurance companies to pull the customers towards Life Insurance. This paper aims to suggest new strategies to reduce early lapsation and to enhance the growth of Life Insurance Sector