Term insurance policies may increase by 20-40% in 3-6 months. Here's why

Updated : May 13, 2020 08:10 PM IST

For pricing, the reinsurers measure actual vs expected claims and if this ratio is more than expected, it leads to a negative experience in mortality.

The insurers increase the prices by refiling the existing products to the regulator with certain changes and a price rise.

Term insurance policy premiums may increase by 20-40 percent in the next three-six months, according to Policybazaar - an insurance aggregator.

"In the past one month, few insurance companies have already increased the prices of term life insurance plans by 20 percent. For them, there will be another price rise of 20 percent within 3–6 months. For companies who have yet not increased the price, there will be a total increase of 40 percent," explains Santosh Agarwal, chief business officer, Life Insurance, Policybazaar.

Term policies, Agarwal says, are a relatively new product in the Indian insurance industry, and the premiums are lower compared with most of the developed nations.

"In most western countries, the term plan prices are much more justified as they are calculated considering refined data and experience. The prices in India are mostly built on assumption and the assumption may not always hold through," she adds.

(Also read: Health insurance policies may soon cost 5-25% more; here's why)

For pricing, the reinsurers measure actual vs expected claims and if this ratio is more than expected, it leads to a negative experience in mortality.

"Over the last couple of years, the industry and the reinsurers (largely) have been experiencing mortalities higher than that assumed in the premium calculation, where the current level of premium rates have become unviable," adds Avdhesh Gupta, Appointed Actuary, Bajaj Allianz Life.

This is the most important reason why there is an increase of 40 percent in the term life insurance pricing as demanded by the re-insurers.

The insurers increase the prices by refiling the existing products to the regulator with certain changes and a price rise.

With several changes being incorporated, this is probably the best time for customers to buy term life insurance policy as the earlier they buy the lesser they pay, experts suggest.

Term insurance policies may increase by 20-40% in 3-6 months. Here's why

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