36.7 Insurance
Agency and branch interviews ask persistency (how much of the book is still in force) and loss ratio (claims divided by premium). New policies sold, alone, is how a weak book hides.
| KPI | What the number means | Who uses it | Action it drives |
|---|---|---|---|
| Persistency | (Policies in force minus lapsed) divided by policies in force. | Agency manager | Lapses this month are a call list, not a footnote under "new business". |
| Loss ratio | Claims divided by premium earned. | Underwriting, branch head | A high ratio on a small book stops that city's new business until the claims are read. |
| New policies | Count sold this month. | Only next to persistency | A city can "grow" while the old book leaves. |
Fictional sample rows. One month. Premium and claims are fictional rupees, not a filed result.
| City | In force | Lapsed | Premium | Claims | New policies |
|---|---|---|---|---|---|
| Pune | 200 | 10 | ₹4,00,000 | ₹2,40,000 | 40 |
| Nashik | 150 | 6 | ₹3,00,000 | ₹1,50,000 | 20 |
| Kolhapur | 100 | 20 | ₹1,60,000 | ₹1,40,000 | 50 |
| Nagpur | 180 | 9 | ₹3,60,000 | ₹1,80,000 | 25 |
| Mumbai | 80 | 4 | ₹1,60,000 | ₹80,000 | 10 |
| Sambhaji Nagar | 120 | 24 | ₹1,80,000 | ₹1,60,000 | 45 |
Worked from those rows.
- In force 830. Lapsed 73. Premium ₹15,60,000. Claims ₹9,50,000. New policies 190.
- Persistency is (830 − 73) ÷ 830 = 757 ÷ 830 = 91.2%.
- Loss ratio is claims divided by premium. 9,50,000 ÷ 15,60,000 = 60.9%.
Nashik: persistency (150 − 6) ÷ 150 = 96.0%, loss ratio 1,50,000 ÷ 3,00,000 = 50.0%. Kolhapur: persistency (100 − 20) ÷ 100 = 80.0%, loss ratio 1,40,000 ÷ 1,60,000 = 87.5%, with 50 new policies.
| Good KPI | Vanity metric | |
|---|---|---|
| From the same rows | Kolhapur loss ratio 87.5% and persistency 80.0% | Kolhapur 50 new policies |
| Why | Claims are almost the whole premium, and one in five policies lapsed. | The new-business card is the best in the file. It is the wrong celebration. |
What the manager does. The Nashik agency manager keeps the book that lapsed only 6 of 150. The Pune book is acceptable in this file (10 lapsed of 200 = 5.0% lapse, which is persistency 95.0%; loss ratio 2,40,000 ÷ 4,00,000 = 60.0%). The Kolhapur manager stops the new-policy contest and calls the 20 lapses. Sambhaji Nagar is the same pattern: 45 new policies, persistency (120 − 24) ÷ 120 = 80.0%, loss ratio 1,60,000 ÷ 1,80,000 = 88.9%.
Ravindra Bagale's Tip
Friends, many students define persistency as "new policies divided by lapsed". That ratio means nothing. Subtract lapses from in force, then divide by in force. Don't panic; write the formula first.
Ravindra Bagale's Tip – मराठी
मित्रांनो, बरेच students persistency ला "new policies भागिले lapsed" म्हणतात. त्या ratio ला काही अर्थ नाही. In force मधून lapse वजा करा, मग in force ने भागा. घाबरू नका, आधी formula लिहा.
Ravindra Bagale's Tip – हिंदी
दोस्तों, बहुत से students persistency को "new policies भाग lapsed" कहते हैं. उस ratio का कोई मतलब नहीं. In force में से lapse घटाओ, फिर in force से भाग दो. घबराओ मत, पहले formula लिखो.