Another insurer said that a few firms are looking at a hike in the premium rate for term insurance in the near future.
Term insurance premium could see another hike this year with at least a few insurers mulling an increase in rates. However, in some relief to customers, the quantum of increase may not be as high as in the past few years. The increase is likely to be in the 5-8% range this time.
According to industry sources, a number of insurers are mulling an increase in the premium rates this year with the expected normalisation of the industry after two years of high claims from the Covid-19 pandemic.
“The past two years have seen high claims for the life insurance industry due to the pandemic. While reinsurers had increased rates, some insurers chose not to absorb it at that time and not burden the customer,” said an insurer, adding that some of these firms are now planning to hike rates in the next few months.
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According to industry estimates, term insurance premium has risen by about 45% over the last two to two-and-a-half years as reinsurers had increased their rates and tightened underwriting due to the high mortality and unprecedented claims during the pandemic.
Another insurer said that a few firms are looking at a hike in the premium rate for term insurance in the near future. “However, unlike in previous years, this time, the increase would be in single digits,” he said, adding that the increase in term cover premiums is due to the increase in reinsurance rates in the last few years during the pandemic, which some insurers did not pass on at the time.
“Moving ahead, the prices would also depend on external factors which may impact life expectancy. Recent reports from World Health Organization on an emerging pathogen with even deadlier potential, and with China bracing for a new Covid wave, may have an impact on the term insurance prices too,” the insurer pointed out.
Industry experts however, point out that the premium for term insurance remains much lower in India compared to other countries.
For a `1 crore term insurance, the monthly premium can be Rs 1,000 or even less for a 30-year-old individual.
“For less stringent underwriting norms, that would help increase penetration of life insurance policies, there is still some scope for higher premium,” said an expert.
Term insurance is a pure life insurance policy that provides financial protection that provides a guaranteed sum to the nominee in case of death of the policyholder. The product saw a sharp increase in customer interest and demand during the pandemic.
