Term insurance to get costlier with tightening of underwriting norms
With reinsurers pricing being increased, many life insurers are expected to increase the term insurance rates by 20-40 per cent in the month of December.
- Dec 6, 2021,
- Updated Dec 6, 2021 2:29 PM IST
With reinsurers pricing being increased, many life insurers are expected to increase the term insurance rates by 20-40 per cent in the month of December. Not only increase in rates, insurers are also expected to tighten their underwriting norms, which might make difficult for people with low income and less education to get the term cover.
“Some insurers may increase their premiums from December. And, the hike could be in the range of 20 – 30 percent. Despite the hike, I don't think the demand for term products will go down. Since this is an across the board increase, people who want to get covered will buy term plans,” said Naval Goel, CEO and founder of PolicyX.
Experts say with the tightening of underwriting norms insurers are talking about increasing education and income cut offs for customers. “Many insurers are expected to tighten their underwriting norms, which means that people without graduation or having income less than Rs 5 lakh might not get the term cover easily. The low income section will have to depend on standard term insurance cover, which are costlier than regular plans,” said a senior official of the insurance industry on the condition of anonymity.
Saral Jeevan Bima is a standard pure risk cover with common wordings and conditions. The policy offers the maximum cover of Rs 25 lakh and the minimum cover of Rs 5 lakh. Along with a cap on the upper limit on the sum assured, the policy has a minimum term of 5 years and maximum of 40 years. Since the policy offers covers to the lower income group with the small sum assured of even 5 lakh it makes it expensive as compared to other plans. But considering the standard structure experts say the product is simpler and easy to understand for people looking out for term insurance cover.
Will term insurance rates stabilize now? “The term plan prices should stabilise now because we have seen quite a few premium hikes in the last 2-3 years. But, a lot will depend on the mortality experience of the insurers and reinsurers,” said Goel.
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With reinsurers pricing being increased, many life insurers are expected to increase the term insurance rates by 20-40 per cent in the month of December. Not only increase in rates, insurers are also expected to tighten their underwriting norms, which might make difficult for people with low income and less education to get the term cover.
“Some insurers may increase their premiums from December. And, the hike could be in the range of 20 – 30 percent. Despite the hike, I don't think the demand for term products will go down. Since this is an across the board increase, people who want to get covered will buy term plans,” said Naval Goel, CEO and founder of PolicyX.
Experts say with the tightening of underwriting norms insurers are talking about increasing education and income cut offs for customers. “Many insurers are expected to tighten their underwriting norms, which means that people without graduation or having income less than Rs 5 lakh might not get the term cover easily. The low income section will have to depend on standard term insurance cover, which are costlier than regular plans,” said a senior official of the insurance industry on the condition of anonymity.
Saral Jeevan Bima is a standard pure risk cover with common wordings and conditions. The policy offers the maximum cover of Rs 25 lakh and the minimum cover of Rs 5 lakh. Along with a cap on the upper limit on the sum assured, the policy has a minimum term of 5 years and maximum of 40 years. Since the policy offers covers to the lower income group with the small sum assured of even 5 lakh it makes it expensive as compared to other plans. But considering the standard structure experts say the product is simpler and easy to understand for people looking out for term insurance cover.
Will term insurance rates stabilize now? “The term plan prices should stabilise now because we have seen quite a few premium hikes in the last 2-3 years. But, a lot will depend on the mortality experience of the insurers and reinsurers,” said Goel.
Also Read: Big Bull-backed Star Health IPO sees 79% subscription, watch what Profitmart Securities' view
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