As the world is slowly returning to normalcy in the post-Covid era, there are some ‘new normal’ that we are supposed to get accustomed to. One of them is growing term insurance premiums. Some attribute it to rising number of insurance claims that led to back-room recalibration by insurers, while other pass it off as general increase with passage of time.
The industry insiders say that the insurance sector has been facing difficulties in terms of claims as a result of Covid, that led to increase in insurers’ cost – which is being passed on to customers as inflated premium. For instance, SBI Life saw total death claims increase by 74 percent in fiscal 2021, while HDFC Life saw claims related to death increase by 28 percent during the same period.
The average yearly premium for a sum assured of ₹1 crore increased from ₹29,443 in the third quarter to ₹30,720 in the fourth quarter of 2021.
In the last quarter, the term insurance price index value went up by 4.18 percent. The index value has reached ₹23,929 during the quarter. There is a significant difference of 9.75 percent in the term index value between the first quarter and last quarters of 2021.
But the further increase in term insurance premium would only be marginal, says Naval Goel, Founder & CEO, PolicyX.com.
“The prices for term insurance premium might rise a little in the coming months however, the increase will be marginal enough. The industry has always followed a trend where earlier life insurance companies had reduced their premium prices and recently there was a trend of price increase, of course, the pandemic is one of the reasons to be quoted for the same,” says Goel.
In October last year, private life insurance companies registered a growth of 12.14 percent in first-year premiums as compared to October 2020.
The price hike by reinsurers can lead to a jump in the premium amount as the pandemic witnessed an increase in insurance claims which urged reinsurers to tighten underwriting norms.
Some industry experts, however, assert that insurance premiums have been rising simply because the insurance net is spreading wider and now getting into the interiors of India where policyholders with pre-existing diseases and those who have recovered from Covid-19 are getting insurance cover.
“Earlier insurance was a very niche offering, largely in the metros. Now, interior parts of the country look to cover people with pre-existing diseases as well as those who have recovered from Covid-19. So, term plan prices will continue to inch upward over the next 4-5 years,” Vibha Padalkar, CEO of HDFC Life, was quoted by Business Standard as saying.