What Is Policy Revival in Insurance? Complete Guide

For an insurance professional, a lapsed policy represents more than just a lost commission; it signifies a failure in the protection net designed for the client. When a policyholder stops paying premiums, they lose the financial security they initially sought. This is where policy revival in insurance becomes a critical concept.

As a new agent focusing on health and travel insurance, your ability to facilitate a policy revival is a hallmark of excellent customer service. This guide explores the mechanics of bringing a dead policy back to life and, more importantly, how to prevent it from expiring in the first place.

What Is Policy Revival?

Policy revival is the process of reinstating a lapsed insurance policy. In health insurance, a policy lapses when the premium is not paid within the grace period provided by the insurer. Once a policy lapses, the contract between the insurer and the policyholder is effectively terminated. However, insurers often allow a window of time during which the policyholder can restart the policy by paying the overdue premiums along with interest and, in some cases, undergoing a fresh medical check-up.

Why Revival Matters for Health Insurance?

Health insurance is built on the principle of continuous coverage. Most health plans have waiting periods for pre-existing diseases. If a policy lapses and the client buys a new one instead of opting for policy revival, those waiting periods usually reset to zero. By helping a client with policy revival in insurance, you ensure they retain the continuity benefits they have earned over the years.

Why Revival Matters for Travel Insurance?

While travel insurance is typically short-term, multi-trip annual policies are common for frequent flyers. If an annual travel policy lapses, the traveller may find themselves unprotected during a sudden overseas emergency. Reviving an existing annual plan ensures that the traveller does not face a gap in protection while abroad.

The Mechanics of Policy Revival in Insurance

The process of policy revival is not as simple as just paying the bill. It often involves several steps that ensure the risk profile of the insured has not changed significantly during the period of non-payment.

• The Grace Period: Most health insurance policies offer a grace period of 15 to 30 days after the due date. If the premium is paid here, the policy remains active. Policy revival only begins after this grace period ends.
• Revival Application: The policyholder must submit a formal request for revival to the insurance provider.
• Arrears and Interest: All unpaid premiums must be paid in full. Insurers usually charge a late fee or interest on the overdue amount.
• Declaration of Good Health: For health insurance, the insurer may require a Declaration of Good Health or even a new medical examination if the lapse period is extensive.
• Underwriting Approval: The insurance company’s underwriting department reviews the application. They have the right to accept the revival as is, accept it with an additional premium, or reject it if the health status has deteriorated significantly.

Why Policies Lapse: Identifying the Root Causes?

To prevent lapses, an agent must understand why they happen. Usually, it is not a lack of need, but a lack of management.

• Financial Constraints: Unexpected life events can make even a small premium feel like a burden.
• Forgetfulness: Life is busy. Without automated reminders, clients often simply forget the due date.
• Poor Communication: If a client moves or changes their email address without updating the insurer, they might never receive renewal notices.
• Perceived Lack of Value: If a client has not made a claim for several years, they might start to feel the insurance is an unnecessary expense.
• Complex Processes: If the renewal process involves too many steps or a confusing digital interface, clients might procrastinate until it is too late.

Practical Strategies to Reduce Policy Lapses

As a professional agent, your goal is to maintain a high persistency ratio. This is the percentage of your business that stays on the books year after year. Here are actionable strategies to keep your clients protected.

1. Education During the Initial Sale

The seeds of a lapse are often sown during the first meeting. If a client does not fully understand the benefits of their health or travel insurance, they will be the first to drop it when money is tight.

• Explain the Waiting Period: Clearly state that a lapse means waiting another three or four years for certain coverage.
• Highlight the No Claims Bonus: Show them how their sum insured increases for every year they stay healthy and keep the policy active.

2. Implement a Multi-Channel Reminder System

Do not rely on the insurance company to send the renewal notice. Take ownership of the relationship.

• T-Minus 30 Days: Send a friendly email or physical letter.
• T-Minus 15 Days: A personal phone call to check if they have any questions about the renewal.
• T-Minus 2 Days: A final text message or reminder.

3. Encourage Automated Payments

The most effective way to prevent a lapse is to remove the human element. Encourage your clients to set up a direct debit or a standing instruction with their bank. This ensures the premium is paid on time, every time, without the client having to take any action.

4. Annual Policy Health Check Calls

Schedule a brief call once a year, not just to ask for money, but to review their needs.

• Health Insurance: Ask if they have had life changes, such as a new child or a change in health status, that might require a higher sum insured.
• Travel Insurance: Ask if they have upcoming trips planned for the year to see if an annual multi-trip policy is more cost-effective than single-trip plans.

5. Address Financial Hardship Proactively

If a client mentions they are struggling financially, do not just accept the lapse. Explore alternatives:

• Reduction in Sum Insured: It is better to have a smaller policy than no policy at all.
• Change in Payment Frequency: Some insurers allow switching from an annual payment to a monthly or quarterly schedule to ease the cash flow.

Managing the Policy Revival Process for Your Client

When a policy does lapse, your role as an advisor is to guide the client through the policy revival process as quickly as possible.

• Act Fast: The longer a policy remains lapsed, the harder it is to revive. Most insurers have a limit, often six months to two years, beyond which policy revival in insurance is no longer an option.
• Documentation Check: Assist the client in gathering necessary documents, such as the most recent health reports or a signed declaration.
• Liaise with Underwriters: If there is a minor health issue, you can advocate for your client with the insurance company's underwriting team to ensure a fair revival process.

The Long-Term Benefits of Focus on Retention

Focusing on policy revival and retention is more than just good ethics; it is good business.

1. Stability of Income: Renewals provide a steady stream of commission with significantly less effort than finding a brand new lead.
2. Referrals: A client who sees you fighting to keep their policy active when they forgot to pay is a client who will recommend you to friends and family.
3. Professional Reputation: In the BFSI sector, agents with high retention rates are viewed as more reliable and professional by both the insurers and the clients.

Also Read : Things to Do When Health Insurance Lapses

Conclusion

Mastering the nuances of policy revival in insurance is a vital skill for any health or travel insurance agent. It is a tool that allows you to protect your clients even when they make a mistake in managing their finances. By focusing on education, proactive communication, and automated systems, you can significantly reduce the number of lapses in your portfolio.

Remember, every policy you revive is a family you have kept protected and a relationship you have strengthened. Your value as an agent is measured not just by the new business you bring in, but by the security you maintain for those who have already trusted you with their wellbeing.

Frequently Asked Questions (FAQs)

1. What is the difference between a grace period and the revival period?

The grace period is a short window, usually 15 to 30 days, after the premium due date where the policy is still active. If the client pays during this time, there is no break in coverage. The revival period starts after the grace period ends and the policy has officially lapsed. During the revival period, the policy is inactive and no claims can be made until the policy revival is approved.

2. Can all lapsed health insurance policies be revived?

No. Every insurer has a maximum timeframe for policy revival. Typically, if a policy has been lapsed for more than two years, most companies will require the client to purchase a completely new policy, losing all previous benefits.

3. Does policy revival in insurance require a new medical test?

It depends on the age of the policyholder and the length of the lapse. If the policy has been lapsed for only a few weeks, a simple health declaration usually suffices. If it has been lapsed for several months, especially for older clients, a full medical examination may be required.

4. Will the premium amount change after a policy revival?

The base premium usually remains the same as it was before the lapse. However, the client will have to pay interest on the unpaid premiums and potentially a revival fee. If the medical exam reveals new health issues, the insurer might apply a loading to the revived policy.

5. What happens to the No Claims Bonus (NCB) during revival?

If the policy is revived within the timeframe permitted by the insurer, the NCB is usually preserved. However, if the client waits too long and has to buy a new policy, the NCB is lost.

6. Can travel insurance be revived after a trip has started?

No. Travel insurance generally cannot be revived or purchased once the journey has commenced. For annual multi-trip policies, policy revival must happen before the next trip begins to ensure coverage.

7. How does a lapse affect Waiting Periods in health insurance?

This is the most critical point. A lapse usually resets the clock. Most health policies have a 2 to 4 year waiting period for specific illnesses. Policy revival maintains this clock, whereas a new policy starts it from year one.

8. Is there a penalty for policy revival?

Most insurers charge a nominal revival fee or interest on the overdue premium amount to cover administrative costs and the loss of investment income.

9. How can I track my clients' renewal dates effectively?

Most professional agents use a Customer Relationship Management system. You can also use simple digital calendars or spreadsheet trackers. The key is to have a system that alerts you at least 30 days before the expiry.

10. What should I do if an insurer refuses to revive a policy?

If the insurer refuses revival due to a significant change in health, you should help the client look for alternative coverage. However, you should first double-check if the refusal is within the policy's terms and conditions.

11. Can I help a client revive a policy they bought from another agent?

Yes, in many jurisdictions, you can become the agent of record for a policy if the client wishes to switch. This allows you to manage the policy revival and earn future renewal commissions.

12. Does a lapsed policy cover emergency hospitalisation?

No. Once a policy has lapsed and is past the grace period, the insurer is not liable for any claims. This is why immediate policy revival is so important.

13. How do I explain the cost of revival interest to a frustrated client?

Explain that the interest is a standard requirement to keep the risk pool fair for all policyholders who pay on time. Frame it as a small price to pay to keep years of continuity benefits.

14. What is a Special Revival Scheme?

Occasionally, insurance companies launch schemes where they waive the revival fee or interest to encourage former clients to return. Keep an eye on company circulars for these opportunities.

15. Is Reinstatement the same as Revival?

In the context of insurance, these terms are often used interchangeably. Both refer to the process of putting a lapsed policy back into full force.