Premiums on new life insurance premiums for both term plans and endowment are rising
- Life insurance policy premiums are expected to rise in the near future as insurers look to offset the rise in claims due to increasing deaths due to the pandemic.
- Insurance companies say the claims have risen by 2-3 times since pre covid and is hurting their margins.
- “Claims the life insurance industry gets in a full year, we have just got in the first six months of this financial year,” said Manoj Kumar Jain, managing director and chief executive officer at Shriram Life Insurance to Business Insider.
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AdvertisementLife insurance companies are planning to increase the premium amount on the life plans including term plans and
The rise in premiums comes as the life insurance companies are struggling with the highest claims due to increasing deaths due to covid-19.
However, the premium hike will only apply to customers buying new policies. For existing policyholders, premium will remain the same.
“Life insurance claims have risen two to three times from pre covid levels especially in the second wave of covid-19. Not only in term plan, even in endowment plan most of the companies are looking to revise premiums. We are also in a process of increasing premiums in endowment plans by 2-5%. In term plans, the premium increase will be higher because it is a pure risk plan,” said Manoj Kumar Jain, managing director and chief executive officer at Shriram Life Insurance to Business Insider.
Endowment plan is a life insurance policy which provides you with a combination of both i.e.: an insurance cover, as well as a savings plan.
“And this is not the phenomenon just with Shriram Life Insurance but across industry, every second company will increase premiums. This is because whatever claims the life insurance industry gets in a full year, we have just got in the first six months of this financial year. And these are largely Covid-19 claims, which is putting a big pressure on our underwriting margins,” added Jain.
Reports also say that the rising claims have made it difficult for the reinsurers to offer coverage at older rates. And, price hike by reinsurers means the companies will need to raise premium costs.
“The pandemic has augmented the awareness amongst consumers on the benefits of life insurance, and we have seen that term plans were being purchased more. At the same time, the industry also planned and enhanced its reserves for COVID-related claims. We also observed reinsurers been impacted at the time, and as an outcome of their evaluation processes we have seen an increase in the prices of term plans, which in-turn has brought about a rise in the premium rates for term plans,” said Tarun Chugh, managing director and chief executive officer at Bajaj Allianz Life Insurance.
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