Policy Lapse Rate
Percentage of in-force policies that lapse due to non-payment of premium in a period
What is Policy Lapse Rate?
Policy lapse rate is the percentage of in-force insurance policies that lapse, meaning the customer stops paying or does not renew. It shows how many policies are being lost.
Lapses reduce premium income and wasted acquisition cost, so they are closely tracked.
How this KPI is measured
- Function
- Customer Success & Service
- Sub-function
- Policy Retention
- Industry
- Insurance
- Type
- Lagging
- Impact
- Risk
- Unit
- %
- Measurement frequency
- Monthly
- Formula
- (Policies lapsing / Total in-force policies) × 100
How to calculate it
Divide policies lapsing by total in-force policies, and multiply by 100.
For example, if 4,500 of 90,000 in-force policies lapsed in a year, the lapse rate is 5%.
Split by product, channel and policy age, and look at reasons, such as price, payment problems or moving to another insurer.
Where it is used
Protecting premium income
Reduce losses.
Finding causes
Learn why customers leave.
Improving payment and renewal processes
Fix avoidable lapses.
How to improve it
Tips and common mistakes
- Many lapses are due to payment failure and can be prevented.
- Follow regulations on renewal communications and fair treatment.
- Split by channel.
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