Planning for a life insurance plan, get it now.
The life insurance companies are increasing premiums for term insurance plans. Several insurance companies have increased the premiums during the last three months, and others are likely to do the same.
From April 10th, HDFC Life Insurance, Tata AIA Life Insurance, Max Life Insurance, and ICICI Prudential Life Insurance all improved the premium (price) on term insurance policies. They increased premium up to 30% on their term insurance policies. The industry players believe that the surge in premiums is not due to the current pandemic, but due to the increase in reinsurance premium.
Why are insurers hiking premium?
The hike in insurance premium on term life insurance policies is because re-insurers have increased the premium rates on reinsurance. Reinsurance is an action made by insurance companies by taking insurance policies to protect itself from the risk of loss. Re-insurers increased the premium due to a rise in claims. Due to a sudden rise in mortalities and claims from the expected figures, the re-insurers have increased the premium rate by 30-50%, said Novel Goel, CEO, and Founder of PolicyX.com.
Many market players still haven’t increased the term insurance premiums. According to industry sources, this can be because insurers might be thinking whether to pass on the hike from re-insurers to policyholders.
Factors responsible for the rise in premium
The insurance premiums are calculated based on the expected mortality rate and claim outgo, accordingly the re-insurers fix the reinsurance premium charges for insurance companies. So if the actual rate exceeds the expected the re-insurers increases the reinsurance premium for insurance companies, and the insurers will increase term insurance premium by refiling their existing products with the IRDAI with some changes and increase in price.
A rise in investment buyers is seen for the past few months with the rise of a novel coronavirus in India. Compared to endowment plans, term plans are the simplest form of insurance and large sum assured with a lower premium. Market players do not expect the pandemic to cause many changes to the claims. Prasanth Tripathy, MD, and CEO at MAX Life Insurance said, the price change was needed and it hasn’t gone up much forward. And the term plans are still extremely affordable.
