The COVID-19 impact on insurance premium is visible. IndiaFirst Life Insurance is the latest among life insurers to hike the premium on term insurance plans by up to 25 per cent from April 21. The company has seen a 30 per cent jump in claims in last one year.
For a Rs 1 crore coverage term pan across different ages, the hike has happened in the range of 14-25 per cent. For example, a 30-year-old male customer would pay Rs 8,600 annual premium for a term coverage of Rs 1 crore compared to Rs 7,000 earlier.
"The revised pricing will apply to policies sold from April 21. Insurance regulator doesn't allow a hike beyond 25 per cent in one go. For us, it is 20 per cent on an average. The premium on term policies had been going down traditionally. This is the first time that we are hiking the premium," says RM Vishakha, managing director and chief executive officer, IndiaFirst Life Insurance.
"The spread of Covid has definitely played a role in term plan premium going up. Term policies are capital intensive. The reliance on reinsurers for a mid-sized company like ours is critical. If they have factored in Covid in premium pricing for us, we have to do it for customers as well. We have seen 30 per cent increase in claims on account of Covid-19 in a year," she adds.
Term policies are typically pure protection plans that only offer a death claim in case of an unfortunate event. If the policyholder survives the policy period, he or she receives nothing unlike guaranteed plans which have an investment component to it. Note that the premium on a term plan is significantly lower than that on a guaranteed plan for similar policy coverage.
Most insurance companies had seen the interest shifting to term plans post COVID-19 in 2020. However, the demand for guaranteed products is once again back. "Customers are looking for protection with guaranteed return. So non-participating insurance products have been seeing traction," says Vishakha.
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