Insurance in India is still a huge commission based business what is interesting the lapsation ration is on the high-rise from the data collected.
In insurance, customers return this product by either letting their policy lapse or by voluntarily surrendering their policy. In case of the non-linked business (term, group, health and endowment plans) for Birla Sun Life Insurance Co. Ltd, the lapsation ratio was as high as 72% for FY11.
Lapsation ratio indicate the number of policies lapsed divided by the average number of policies
at the beginning and end of the year. So if the average number of policies at the beginning and end was 100, the number of policies lapsed was 72.
Surprisingly till 2009 around 80% of the industry was made up of unit-linked insurance plans (Ulips), but once the Ulip 2010 guidelines capped costs to an effective 2.25% over the life of the policy (over a 15-year period), the life companies tweaked their machines to produce and sell more “traditional” plans in which first-year commissions can still go as high as 35-40%.
I am not an expert in the matter but just one advice start with buying an insurance policy for the right reason: protection. As the market is run by commission-hungry distributors, the onus lies squarely on you