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Life insurance policies are set to become dearer next year, according to media reports. Large reinsurance firms are likely to increase charges that life insurers might pass on to customers, reported The Economic Times.

It is estimated that premiums will cost 20-40% more. The price rise will impact policies bought online and offline. This is the first time the online market will witness a rise in about six years, said the report.

While some insurers have sought Insurance Regulatory and Development Authority of India’s (Irdai) permission to hike charges, some others are still in talks with global re-insurers.

The Economic Times quoted Vighnesh Shahane, CEO, Ageas Federal Life Insurance, as saying that the price increase looks inevitable. Higher claims due to the pandemic have hit reinsurers, he said.

Hike in insurance prices expected

Sanjay Kedia, CEO, Marsh India Insurance Brokers, is quoted as saying that said that premium rates have already risen with corporate group policies. He added that retail premium rates could increase further by 40-60% while the hike in corporate premiums could be between 50-100%.

The hike in prices is expected even as insurance awareness is peaking and demand rising. LIC chairman MR Kumar had earlier said insurers had made profit despite settling a high number of claims. He also said higher prices could dent the rise in demand.

There has also been demand for a lower GST rate on insurance. Concurring with former IRDAI member Nilesh Sathe who said charging 18% GST on insurance premium was “atrocious”, LIC chief Kumar has sought a lower tax rate insurance. Kumar had said the current 18% GST is “too high”.

The reports of possible hike in premium come at a time when the new business premiums (NBP) of 24 life insurance companies has registered a 5% degrowth in October. LIC’s performance, in particular, was tepid.  The industry received Rs 21,606 crore in NBP, down 5.14% year-on-year. While private insurers recorded double-digit growth of 12% at Rs 8,105.46 crore, LIC’s new business premium degrew more than 13% at Rs 13,500.78 crore. LIC recorded a massive decline in individual single premiums and muted growth in group single premiums.

The pandemic has heightened the risk awareness among consumers and as a result, the demand for insurance products has improved. Experts said high taxes will act as a deterrent at a time insurance penetration is talked about at various levels.