Three private life insurers increase term plan rates by 10-30%

As many as three large private life insurers, who have reinsurance contracts with a global rein­surer, have revised their term plan rates. Three more are expected to revise their rates this month, said sources in the know. The rest with reinsurance contracts with the global reinsurer are expected to hike their rates in the current quarter.

Munich Re had nudged its insurance partners on the hike in September and insurers were engaged in negotiations with the reinsurer on the quantum of increase.

ICICI Prudential Life Insu­rance, HDFC Life Insurance, and Bajaj Allianz Life have so far revised their term plans rates anywhere in the range of 10-30 per cent, said a source.

“The company has taken a premium hike of 10-15 per cent on its term plans,” said a spokesperson for Bajaj Allianz Life.

Tata AIA Life, Aditya Birla Sun Life Insurance, and Max Life Insurance are expected to hike their term plan rates this month. IndiaFirst Life Insurance, which has its reinsurance contract with Indian reinsurer GIC Re, has also raised its term plan rates.

Business Standard reached out to ICICI Prudential Life Insurance, HDFC Life Insurance, Max Life Insurance, Aditya Birla Sun Life Insurance, and Tata AIA Life, but emails to these companies did not elicit a response till the time of going to press.

Naval Goel, founder and chief executive officer, PolicyX.com, said, “Two life insurance players have increased the premium for their plans - ICICI Prudential Life and HDFC Life. The average increase in premium prices is approximately 15 per cent for new customers."

Industry insiders suggested that term plan prices in India were among the lowest in the world for a long period, but have been increased a few times previously. Since the pandemic began, term plan rates have gone up between 25 per cent and 30 per cent, said a source. Factoring in the current hike, the increase in term plan rates will be anywhere between 50 per cent and 60 per cent.

Experts said this hike should endure for a few more years unless the third wave of the pandemic plays spoilsport. While the global reinsurer had asked for a 45–50 per cent hike, insurers have opted not to pass on the entire hike to consumers and are mostly revising their price in the range of 15–30 per cent, thus absorbing some part of the increase in prices themselves, said experts.

Apart from premium hikes, some insurers have tightened their underwriting standards further. As part of this process, some insurers are not issuing policies to people with higher secondary degrees, and have also raised the minimum income requirement to obtain a Rs 1-crore cover. Further, they have excluded some pincodes from their coverage.

“Some insurers, who earlier offered term plans to non-graduates, have now decided to offer term insurance plans only to customers who are at least graduates,” said Goel.

“One insurer has classified cities into top and non-top. The minimum income criterion for obtaining a term insurance in a top city remains unchanged at Rs 3 lakh for the salaried and Rs 5 lakh for the self-employed. For a non-top city, the minimum income criterion has been raised from Rs 3 lakh to Rs 5 lakh for the salaried, and from Rs 5 lakh to Rs 8 lakh for the non-salaried. Additionally, over 5,000 pincodes have been declared negative,” he added.

Further, experts suggested, insurers now are even asking for in–person health check–ups for customers buying term plans with a sum assured below Rs 1 crore. Earlier telemedical facilities would suffice for those buying term plans with sum assured below Rs 1 crore.

The worsening mortality experience for life insurers in the country, exacerbated by the pandemic, has prompted reinsurers to re-evaluate their prices on term plans. Life insurers, as of October 21, coughed up Rs 11,060.5 crore to settle Covid-related death claims — a huge chunk of which came this financial year when the second wave ravaged across the country, revealed the data compiled by the Life Insurance Council — a representative body of insurers.