What is Core & Satellite strategy?

While several insurers are increasing health insurance premium rates, Life Insurance Corporation of India (LIC) the largest insurer by assets under management, will not increase its term insurance rates, according to a news report in Business Standard. Term insurance is a pure protection policy, which pays sum assured to the nominee in case of the untimely demise of the insured within the policy period.

Earlier it was reported that several private players such as Max Life Insurance, Tata AIA Life Insurance, IndiaFirst Life Insurance Company and Aegon Life are some of the companies that are looking to raise the rates. The reason behind this move is due to many reinsurers increasing rates for underwriting portfolios of these pure-protection covers and higher-than-expected mortality claims.

Reeling under the impact of the coronavirus pandemic, insurers do not have the headroom to absorb higher costs. Some reinsurers changed rates at the start of this fiscal year. While others, who may not have fully reflected the hike then, are seeking to change rates now to catch-up with market rates.

Reinsurers price their rates based on life expectancy and not on a single-year experience. However, this time it has coincided with the pandemic.

Given that there are a plethora of term life insurance policies available in the market, the insurance regulator directed all insurers last year to launch Saral Jeevan Bima Policy. It is a pure protection plan with standard conditions and hence it is easy for investors to compare and choose the cover according to their needs. The pure term plan comes without any maturity benefit. Anyone aged between 18 years and 65 years can buy the policy for a sum assured between Rs 5 lakhs and Rs 25 lakhs. Given the size of the sum assured, Saral Jeevan Bima Policy makes it easier for many self-employed and people in the category of lower-income to have term insurance to protect their family.