New Lic Mortality Tables By March-End

The decision to revise the mortality tables, announced by finance minister P Chidambaram in his budget speech, is significant because the government is planning to open the life insurance sector, along with non-life insurance, to private and foreign companies.

The Life Insurance Corporation had last revised the mortality rates in 1975. Mortality has fallen sharply since then as improvement of health services and nutrition levels has resulted in an increase in life expectancy. But the extent of mortality among the insured population, which is usually the better-off segment, will be known only after the new tables are announced.

Asked if the revision will result in a drop in premium rates, Goverdhan said: A revision in tables does not necessarily mean reduction in premium rates. Mortality of insured people is usually lower than population mortality. But in our case, there does not seem to be much difference between the two.

 

Life insurance premia are higher in India compared with international price levels because the LIC assumes a lower level of life expectancy, based on pre-1975 data. If premium rates come down on the basis of the new mortality tables, it will knock off the price advantage which foreign insurers planning to enter the industry claim to have.