Calculate persistency ratio from beginning and ending in-force policy counts or annualized premium, plus rolling cohort retention factors.

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Persistency Ratio Formula

The following formula is used to calculate the persistency ratio for a given period.

PR = (Pe / Pb) × 100

Variables:

  • PR is the persistency ratio (%)
  • Pe is the number of policies remaining in-force at the end of the period
  • Pb is the number of policies in-force at the beginning of the period

To calculate the persistency ratio, divide the number of policies remaining in-force at the end of the period by the number of policies in-force at the beginning of the period, then multiply the result by 100 to get a percentage.

What is a Persistency Ratio?

The persistency ratio is a measure used in the insurance industry to determine the percentage of policies that remain active over a specified period. It is an important metric for insurers as it indicates customer retention and the effectiveness of their products and services. A higher persistency ratio suggests that policyholders are satisfied and continue to renew their policies, while a lower ratio may indicate issues with customer satisfaction or product offerings.

How to Calculate Persistency Ratio?

The following steps outline how to calculate the Persistency Ratio.

  1. First, determine the number of policies remaining in-force at the end of the period (Pe).
  2. Next, determine the number of policies in-force at the beginning of the period (Pb).
  3. Finally, calculate the persistency ratio using the formula PR = (Pe / Pb) * 100.
  4. After inserting the values and calculating the result, check your answer with the calculator above.

Example Problem : 

Use the following variables as an example problem to test your knowledge.

Number of policies remaining in-force at the end of the period (Pe) = 450

Number of policies in-force at the beginning of the period (Pb) = 500