'Retention' refers to the ability of a company to retain its customers over some specified period. High customer retention means customers of the product or business tend to return to, continue to buy or in some other way not defect to another product or business
‘Persistency’, during a period may be defined as the proportion of policies remaining in force at the end of the period out of the total policies in force at the beginning of the period. In other words, persistency is the percentage of business retained without lapsing or being surrendered. Low lapsation means high persistency and vice versa.
Persistency ratio measures the number of policies that continue in the books of the insurer by the end of the first year (13th month persistency), second year (25th month persistency), third year (37th month persistency), fourth year (49th month persistency) and fifth year (61st month persistency).
Below, we unearth some of the factors that impact persistency.