Several life insurers have lately raised term insurance prices by 20–30% in response to a rise in premium rates by reinsurers. The premium increase followed the highly debilitating second wave of Covid-19 in April–May 21 and contributed to a sharp increase in claims that negatively impacted insurance firms’ profitability.
Life insurers are adopting a circumspect “wait and watch” strategy before deciding to increase premium rates because the impact of the third wave has not yet been thoroughly investigated.
“In keeping with the mortality experience over the previous two years, reinsurers have raised their premiums by roughly 30% in the recent year. According to Rushabh Gandhi, Deputy Chief Executive Officer at IndiaFirst Life, this has caused nearly all life insurance companies to raise their premium prices by more than 20%.
Gandhi continues, “So far, the third Covid wave experience hasn’t been as fatal as the prior two waves. The penetration of vaccines in the eligible population has kept death rates under control. Life insurers, on the other hand, are adopting a circumspect “wait and watch” strategy because the third wave’s effects have not yet been thoroughly researched and understood. IndiaFirst Life is employing a more attentive underwriting strategy even though we do not foresee a further increase in premium rates in the current FY.
“HDFC Life, ICICI Prudential, and Bajaj Allianz Life are the companies that have increased the term insurance rates so far,” claims Rakesh Goyal, Director of Probus Insurance. Additionally, it is anticipated that other insurers will raise their prices.
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The re-insurer player requested a 40–50% price rise, but only a 20–30% price increase was granted by the insurers.
“Still, it’s too early to predict the impact of the third wave,” Goyal continues. Although the number of cases has increased recently, compared to the second wave, there have been no fatalities from the most recent variation. There will be an adjustment in future term plan rates if the situation gets out of hand in the upcoming days and there are additional casualties.
The value of the Term Insurance Price Index has increased by 4.18 percent in Q4, 2021, according to PolicyX.com’s “Insurance Price Index.” According to the PolicyX.com analysis, there was a significant variation in the term index value between Q1 2021 and Q4 2021 of 9.75 percent.
According to a life insurance report from Emkay Global Financial Services, a reinsurance price increase was inevitable even before the severe second Covid-19 wave and had been occurring selectively (selected products and insurers) over the previous few years.
This is because reinsurers’ claim experience in pure protection has been declining. The second wave’s increase in claims necessitated the reinsurers raising rates more quickly and steeply in order to balance the individual protection portfolio’s worse-than-anticipated mortality experience in recent years and recover some of the losses brought on by the increase in claims.
What Should One Do?
“The best strategy is to purchase early in life. The older age groups holding the higher risk of death are reflected in the significant pricing changes. Comparing pricing before making a purchase is another crucial habit.
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“Since different businesses offer different prices, you must compare their top prices online before making the purchase,” explains Naval Goel, founder, and CEO of PolicyX.com.