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December 14, 2015
Term life insurance premiums have plummeted over the last six years, thanks to increasing life expectancy, online sales and declining reinsurance rates.
Since 2009, term insurance premiums have plunged by as much as 75% as sales have increasingly moved online, Mr Yashish Dahiya, CEO of PolicyBazaar.com. For instance, an INR10-million (US$149,000) cover for a 30-year-old male cost around INR30,000 in 2008, but the premium today for the same cover would be around INR8,000, reported the Hindu Business Line.. Insurers also attribute the increase in longevity, with the average life span increasing from 62 to 72 years due to medical advancements, as a significant reason for the decline in term insurance premiums. Mortality is one of the key factors used in determining premiums.
“We have seen a 10-15% decline in the premiums rates of online term plans during the last fiscal year. Premium rates in the Indian market are now on par with term insurance premiums in countries like Hong Kong and Singapore,” said Mr Sunil Sharma, Appointed Actuary and Chief Risk Officer, Kotak Life Insurance. The country’s largest insurer Life Insurance Corporation (LIC) has also seen a decline in pure risk premium adjusting for increasing life expectancy last year. This has also resulted in a fall in reinsurance rates, which are reflected in the latest mortality table as private insurers now have their own experience. “In the last decade, the industry was using LIC’s mortality assumptions for private companies. Now that private companies have their own experience, reinsurers have realised that the segment of customers that private companies underwrite is slightly better,” said Mr Srinivasan Parthasarathy, Chief Actuary and Appointed Actuary of HDFC Life.
Insurers are also willing to offer much better rates for online term plans as the customer segment is perceived to be more affluent and there is no intermediary involved in the buying process. Mr Niraj Shah, Director – Marketing, Strategy & Products, PNB Metlife, said that disclosure levels are higher in the online channel as the customer is purchasing the policy according to his/her own need, enabling finer pricing. Persistency rates are also significantly much higher for those who purchase term plans online which reflects in the pricing, said Mr Pradeep Pandey, Chief Marketing Officer at Future Generali Life insurance. Insurers says that for online term plans persistency is above 90% while for other policies persistency levels are around 65%.