Due to a rise in premium rates by reinsurers, a number of life insurance companies have recently raised rates for term insurance by 20–30%. The rate hike happened after the second wave of Covid-19 caused a lot of damage in April and May 21. This caused a high rise in claims, which hurt the margins of insurance companies. Since the effects of the third wave haven’t been fully studied yet, life insurers are taking a careful “wait and see” approach before choosing whether or not to raise premiums.
“Reinsurers have raised their rates by about 30% in the past year, which is in line with what they’ve seen with deaths over the past few years. “This has caused almost all life insurance companies to raise their premiums by more than 20%,” says Rushabh Gandhi, Deputy Chief Executive Officer at IndiaFirst Life.
Gandhi says, “So far, the third Covid wave doesn’t seem to be as bad as the first two. Due to the high rate of vaccination in the eligible community, death rates continue to stay low. But because the effects of the third wave haven’t been fully studied and understood yet, life insurance companies are taking a careful “wait and see” approach. We at IndiaFirst Life don’t expect premium rates to go up anymore in this fiscal year, but we are being more careful with our screening.
Rakesh Goyal, Director of Probus Insurance, says, “HDFC Life, ICICI Prudential, and Bajaj Allianz Life are the companies that have raised term insurance rates so far. Also, other insurance companies are likely to raise their rates as well. The re-insurer wanted the prices to go up by 40–50%, but the insurance companies only raised them by 20–30%.
Goyal says, “It’s still too early to say what the effects of the third wave will be.” Even though the number of cases has been going up in the last few days, there have been no deaths from the latest strain, which is different from the second wave. If things get out of hand in the next few days and more people die, there will be a change in the rates of term plan going forward.”
The Term Insurance Price Index Value has gone up by 4.18 percent in Q4, 2021, according to PolicyX.com’s “Insurance Price Index.” According to the PolicyX.com study, the value of the term index changes by a huge 9.75% between Q1 and Q4 of 2021.
A report from Emkay Global Financial Services on life insurance says that the reinsurance price hike was coming before the severe second Covid-19 wave because reinsurers’ claim experience in pure protection was getting worse. This has been happening slowly over the last few years with only some products and insurers.
Because the second wave caused a rise in claims, the reinsurers had to raise rates more quickly and more sharply to make up for some of the losses caused by the rise in claims and to make up for the fact that death rates in the individual protection portfolio have been lower than expected in recent years.
How Should Someone Act?
“The best way to do it is to buy early. As most of the price changes are reflected in the older age groups, which have a higher chance of dying, they are the ones most affected. Another important thing to do before buying is to compare prices. “Prices vary from company to company, so you should compare their premium prices online before buying,” says Naval Goel, founder, and CEO of PolicyX.com.