A committee, including Mortality and Morbidity Investigating Centre (MMIC), an affiliate of the Institute of Actuaries of India (IAI), actuaries and members from the industry has prepared a new mortality table based on 2008-10 data. It has considered the data collected by both Life Insurance Corporation (LIC) and the private sector insurers. The committee has presented the table to the insurance regulator.
Once the Insurance Regulatory and Development Authority (Irda) approves the table, companies will start using it. At present, industry uses a 1994-96 LIC table. Life expectancy of Indians during 2005-10 rose to 64.7 years compared with 62 years during 1997-2001.
According to the Indian Assured Lives Mortality (1994-96), for people who are 40 years old, the probability of their death is 2.053 per 1,000. For 60-year-olds, the probability is 13.073 per 1,000, which results in a higher premium.
According to an actuary, since 1994-96, mortality rates have come down by 25 to 30 per cent in the higher age brackets. This may translate into a reduction of premium by 15 to 20 per cent in certain segments.
One of the committee members said premium would fall substantially for people in the younger age group. Also, the rate of premium increase could come down for those in the older age group.
“Premium will not change in the age group where the policies are sold most, that is the middle age group. Companies have already considered the improving life expectancy while designing their products,” he added.
The new table will provide data for various product categories based on the experience of individual insurers. It is based on the gender, age and geography, among other factors like rural, urban. At present, the tables only provide the mortality rate per thousand.
Insurance companies have been reducing rates across segments uniformly over the years.
But under the new regime, the premium reduction would not be uniform because of varying mortality rates across different age groups. “With the new table in place, premium would reduce for a particular age group and not uniformly. Longevity has come in at 50-55 years where the life expectancy has improved the maximum. There is scope for reduction in premium in this segment,” said SBI Life Appointed Actuary Sanjiv Pujari.
# Mortality rates have fallen by 25% to 30% since 1994-96
# Premium will fall substantially in the younger age group
# Rate of premium increase to also come down in the older age group
# The impact will be felt most on term covers
# Insurance part of Ulips is also expected to fall
Though the impact will be felt most on term covers, the insurance part of unit-linked insurance plans (Ulips) are also expected to fall. In the case of endowment policies, the impact is likely to be on bonus payments on certain policies, since 8 to 9 per cent of the premium is linked to mortality rates.
Since private insurers do not have rates for ages beyond a particular age limit, actuaries said the new table is predominantly based on LIC data. Private sector insurance companies have a relatively younger client base and therefore have data for fewer age groups.
However, companies can decide the premium based on their experience, which would be based on their own tables.