How Policyholder Behavior Impacts Insurance Stocks?

Customers Shape Insurer Profits

– Premium renewals = recurring income stability
– Early surrenders hurt embedded value
– Claims and fraud patterns impact underwriting margins

Key Behaviors That Matter

– Persistency Ratio – Measures policy renewal consistency
– Claim Frequency – Affects risk pool pricing
Lapse Rate – Impacts new business profitability

Why It Affects Stock Prices

– Poor persistency = lower future profits
– High claims = reduced underwriting margin
– Mis-selling leads to regulatory action or refunds

Risks to Watch

– Product confusion leads to early policy exits
– Digital platforms may increase churn
– Fraudulent claims rise in health/general segments

Investment Insights

– Track 13th, 25th, and 61st-month persistency ratios
– Compare claim ratios across quarters
– Avoid insurers with rising lapse or refund rates