Omicron May Influence Term Insurance Rates

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Mumbai: The discovery of the new Omicron variant of the coronavirus has delayed the stability of the term insurance market. Insurers, who are raising their rates on term insurance this month, are now waiting to see the impact of Omicron before finalizing their term insurance strategy.
Speaking to TOI, Managing Director and CEO of Bajaj Allianz Life Insurance Tarun Chugh said the company will raise term insurance rates this month following a communication from reinsurers in September announcing a hike rates and a tightening of the process. “The next two to three weeks and South Africa’s conclusions are critical. The increase in our futures prices was underway and things should stabilize. But with that, it’s a bit of an unknown, ”Chugh said. He added that what is monitored is if it turns out to be virulent and there are a lot of cases of hospitalization, which may require a reset.
While life insurers commit to a fixed life insurance rate, reinsurers regularly revise their rates based on experience. According to Chugh, many insurers have already given thought to the price increase caused by reinsurers in September, but the new variant could lengthen the integration process. In addition to having a waiting period for Covid survivors, insurers are asking for the prospect of a negative RT-PCR report if any of their family members have contracted the virus.
“The term is not an easy product to buy anyway, but now the discussions have lengthened. As a result, the emission rate has gone down, ”Chugh said. He added that this also resulted in the direct issuance of smaller policies.
According to a report released last week on the life insurance industry by rating agency ICRA, the total sum insured for the private sector was Rs 4.04 lakh crore in fiscal year 2021, up only 1% year-on-year. While for LIC it had increased 7.5% yoy to Rs 8.9 lakh crore. Private life insurers have been more aggressive than LICs in lowering term rates. Even after the next hikes, term rates will be cheaper than they were ten years ago. According to Chugh, term rates in India are lower than those in most European countries despite a better life expectancy.
Although there is uncertainty about the forward rates, the decline in interest rates has helped increase sales of annuity business for Bajaj Allianz Life Insurance. Chugh said the guaranteed returns under the annuity have opened up a new segment of the senior market. “In the past seven months, we’ve managed to grow 53% versus the rest of the private industry, which has grown by 30%,” Chugh said.
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