Insurers are raising premiums on term plans, with some companies revising their rates for the third time between March and July this year. Term plans are pure protection covers that pay a pre-determined sum assured on the death of the insured.
According to data sourced from Policybazaar.com, an online insurance aggregator, between March and July, ICICI Prudential Life, Tata AIA, and Bajaj Allianz Life increased the premium for their term plans by 37%, 32%, and 36%, respectively. The rates were compared for a 30-year-old individual for a cover up to 80 years of age (sum assured INR10m [$13,355]). For covers up to 70 years, ICICI Prudential, TATA AIA, and Bajaj Allianz life increased by premium by 37%, 31%, and 36%, respectively.
Causes for price increase
Most insurers cited the increasing mortality rate as the reason for rising premiums.
Mr Bharat Kalsi, CFO of Bajaj Allianz Life, said term plan premiums are being revised due to several reasons. “One of the reasons is the fact that reinsurers are revising their prices due to the expected mortality experience with respect to the actual experience,” he said.
Reinsurers are stressed primarily because of the increase in mortality rates in India in the last couple of years, which has had an adverse impact as the number of death claims have crossed the expected mark, said Ms Indraneel Chatterjee, principal officer and co-founder, RenewBuy.com, an online insurance aggregator.
Falling interest rates, too, may have affected the premiums. Aalok Bhan, director and chief marketing officer, Max Life Insurance, said, “Since March the interest rates have gone down considerably affecting the sustainability of the term premium rates. The revision in premiums observed is in response to the sharp drop in interest rates since March.”
Demand for term plans
Though premiums are on the rise, demand for protection plans has seen a spike, thanks to the fear of death spurred by COVID-19. Most insurers believe that the price rise will not have an impact on the demand in the medium to long-term as awareness has increased.