Non-Renewal Policies Rise in Nepal’s Life Insurance Sector

Kathmandu — The policy surrender rate of life insurance companies in Nepal has seen a notable decline, though the number of non-renewed policies continues to rise, signaling mixed trends in the country’s life insurance business.

According to recent data released by the Nepal Insurance Authority (NIA), life insurers recorded policy surrenders worth Rs. 2.5 billion during the first two months of the current fiscal year. This represents a 9.18 percent decrease compared to the same period last year. In contrast, Rs. 1.75 billion had been withdrawn through policy surrenders by the end of the previous fiscal year.

The number of policyholders choosing to surrender their policies has also dropped. While 19,741 policyholders surrendered their insurance policies by the end of the last fiscal year, the number fell to 15,898 in the same period this year — a 19.47 percent decline.

However, the scenario differs when it comes to policy non-renewals. The NIA data shows that the amount of unrenewed (spent) insurance policies increased by 5.07 percent, rising from Rs. 34.67 billion last year to Rs. 36.43 billion this year. Similarly, the number of policies not renewed has grown by 2.79 percent, reaching 1,213,562, compared to 1,180,616 during the same period last fiscal year.

Experts suggest that while the decline in policy surrenders reflects growing stability and confidence in the life insurance sector, the rise in non-renewed policies could pose challenges ahead. The increasing lapse rate indicates that a considerable number of policyholders are still unable or unwilling to continue their premiums, potentially affecting insurers’ profitability and long-term growth.

According to industry observers, the Nepal Insurance Authority’s recent initiatives — including increased monitoring, public awareness campaigns, and closer coordination with insurance agents — have played a crucial role in reducing surrender rates. The regulator had previously expressed concern over the alarming rise in policy surrenders, often linked to financial distress and public uncertainty.

In recent months, political and economic instability, coupled with a surge in cooperative memberships, has prompted many policyholders to prematurely withdraw their life insurance funds. However, improved field-level engagement by insurers and agents has helped restore customer confidence and curb the surrender trend.