Term insurance premium is expected to rise 15% to 40% after reinsurers tighten underwriting standards in the wake of the Covid-19 pandemic.
As Munich Re tightened underwriting standards, GIC Re raised rates earlier this year.
“GIC, which is our reinsurance company, hiked rates in March and went into effect in April. While so far we have not passed the rate increase on to customers, we now feel the need to increase rates on forward plans taking into account our profitability. We will increase our rates on the term side this calendar year by around 15-20%, depending on the individual’s age, sum insured and quality of life, ”said Rushabh Gandhi, Managing Director Assistant, IndiaFirst Life Insurance.
Vighnesh Shahane, MD and CEO of Ageas Federal Life Insurance, pointed out that during the last 18 months of the pandemic, and particularly during the second wave, reinsurers have been hit hard by the surge in claims, and there had a lot of pressure on them to raise rates.
“We estimate that the prices of term plans are likely to increase by around 20% to 40% overall. However, the exact increase will vary from company to company and from reinsurer to reinsurer. It will also depend on the volume of business that the life insurance company does with the reinsurer, ”he said.
Standby and monitoring mode
Meanwhile, some life insurers are still on standby and standby waiting for reinsurer rates to drop later once the pandemic passes in six months to a year.
While the pandemic has increased awareness and demand for life insurance products, particularly term life insurance products, insurers have also paid high claims, particularly after the second wave of the pandemic. Claims for the sector in the second wave were two to three times higher than in the first wave of the pandemic.
“The life insurance industry saw significant claims in the first quarter of the fiscal year due to the second wave of the pandemic and the profitability experienced when companies built provisions or reserves to mitigate the impact of claims, ”Care Ratings said recently, adding that life insurance premiums are expected to experience significant movement over the 2021-2022 period.
However, key risks such as a delayed economic recovery and a resurgence of Covid cases with a third wave could negatively impact premium growth and an increase in term plan premium rates.