Term insurance premiums rise 30% in last four months, another 30% hike likely

New Delhi: Private life insurers have increased their term insurance premiums by nearly 30% at a time when demand for these products has increased amid the Covid pandemic. According to a report in the Economic Times, industry executives say that this revision has happened in stages between April and July mainly due to a correction in rates specified by global reinsurers before the Covid-19 virus affected India.

Worth mentioning here is that the insurers are yet to price in the impact of the pandemic in their insurance premiums. The recent increase was “driven by adverse claims experience of many companies where death claims were higher than anticipated or priced over the past few years,” an industry executive told the business daily.

ICICI Prudential hiked its annual term premium rates by 37% from Rs 14,697 in March to Rs 20,208 in July for a 30-year-old, non-smoker with Rs 1 crore cover for 80 years, the highest according to an analysis of term tables done by the publication. It was followed by Bajaj Allianz Life, which increased its annual premium by 36% from Rs 8,927 in March to Rs 12,133 in July.

Similarly, Tata AIA Life, increased its premium by 32% from Rs 10,030 to Rs 13,206 in this period with a revision in May. HDFC Life hiked its premium by 20% to Rs 17,563 in July. These increased premiums apply only to new buyers. Existing customers continue to pay the same premium. Another person told the business daily that the biggest factor behind the hardening of rates was a leading global reinsurer pulled back from reinsuring term life claims in India due to “rock bottom” prices.

However, all insurance companies have not increased rates. PNB Metlife, Canara HSBC OBC Life and Max Life have either not hiked their premiums or raised them by just a small margin, the term tables of the companies showed. State-owned Life Insurance Corp of India (LIC), the country’s biggest insurer, has not revised term rates yet. However, the decision to review rates could be based on future claims.

“As of now, our reinsurer has not raised the reinsurance rates and, hence, LIC has not changed the premium rates of its protection-based products,” LIC managing director Raj Kumar told the publication. “However, they are always subject to change for the future new business in either direction, depending upon experience as it emerges and future expectations.”

According to an earlier ET report, industry insiders anticipate another 30% jump in rates over the next six months largely on account of the reassessment of morbidity risks at the global reinsurance level due to the pandemic. “The decision to price a premium would depend on factors such as originations, target market and front-end controls,” Ashish Vohra, CEO, Reliance Nippon told the publication. “Indian term market is pretty competitive in terms of pricing.”

Source: ET Now News