Deccan Chronicle

Term insurance likely to pinch the pocket further


Fair trade regulator CCI on Monday said it has given nod to acquisitio­n of government’s entire stake in THDC India and North Eastern Electric Power Corporatio­n Ltd (NEEPCO) by state-owned NTPC Ltd. As part of transactio­ns, NTPC will acquire 100 per cent of the issued and paid-up share capital of the NEEPCO and 74.5 per cent stake in THDC India, the CCI noted in separate releases.

If you intend to buy a term insurance policy, you should do it soon. This is because life insurance companies are planning to raise the premium rates on term insurance covers before April 1.

The trigger for the revision in premium rates has come from foreign reinsuranc­e companies that have decided to hike the reinsuranc­e rates on term insurance business of domestic life insurers.

Term insurance refers to protection plans where the insured pays a specific premium amount at fixed intervals during the policy term.

In the event of demise during the policy term, the nominees receive the ‘sum assured’ which the policy holder had selected while purchasing the plan.

A Reinsurer is a company that provides financial protection to insurance companies. Reinsurers handle risks that are too large for insurance companies to handle on their own and make it possible for insurers to obtain more business.

A senior life insurance industry official said, “The Reinsuranc­e Group of America (RGA) had given a notice three months ago (which ends this month) of their decision to hike the reinsuranc­e rates for term insurance. Similarly, Swiss Re too has communicat­ed to domestic insurance companies of increasing the reinsuranc­e cost next month. As a result, life insurers could pass on the hike in reinsuranc­e cost to their customers next month. We don’t expect them to absorb the higher reinsuranc­e cost.”

An appointed actuary of a private life insurer said, “The premium rates on term insurance plans are highly competitiv­e today. Secondly, the rates are set on the mortality experience which has worsened than expected. The reinsurers have already communicat­ed that before April 1, they would be reviewing the reinsuranc­e rates on term insurance.”

Trevor Bull, MD and CEO of Aviva Life Insurance told DC, “Term insurance is a commoditis­ed product. Reinsurers and insurance companies are led by their experience on claims and other regulatory updates in pricing for term. It would not be unusual to find them changing prices from time to time, based upon their experience. And yes that could potentiall­y impact the end consumer price for term products.”

When asked what would the increase be for prospectiv­e term insurance buyers, Bull said, “It’s too early to say as it is work in progress and still being assessed. Also, it is dependent on the age and terms of coverages.”

A reinsuranc­e industry official explained, “While deciding the mortality premium rates, insurance companies made assumption­s such as salaried customer versus self employed, smoker versus the non smoker, urban customer versus the rural customer. These assumption­s have not worked and there has been a deteriorat­ion in the mortality experience. Also because of competitio­n, insurers have kept the pricing of term insurance low.”

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