Term insurance set to become dearer soon

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Term insurance rates are likely to go up soon as reinsurers have increased rates and had made underrating norms sticter. IndiaFirst Life Insurance will be increasing our rates on the term side this calendar year by 15-20 %, depending on age, sum assured and quality of life of the individual,” The Hindu BusinessLine quoted Rushabh Gandhi, Deputy CEO, IndiaFirst Life Insurance, as saying in a report.

Gandhi cited reinsurer GI hiking its rates as a reason the IndiaFirst to increase term plan rates.

The report also quoted Vighnesh Shahane, MD and CEO, Ageas Federal Life Insurance, as saying that the term plan prices are likely to rise by around 20-40% across the board. He added that reinsurers have been badly hit badly by a surge in claims during the pandemic.

At the same time, some insurers are expecting the reinsurers’ rates to come down once the pandemic ends.

There has been an increased awareness about the need for insurance in the wake of the Covid-19 pandemic. Term life products, in particular, attracted lots of attention. Care Ratings had said recently that life insurance premiums are expected to witness significant movement over 2021-22.

Delay in economic recovery can, however, act as a dampener in premium growth.

On the other hand, insurers paid out a large number of claims, especially after the second wave of the pandemic. Claims during the second wave were 2-3 times more than that in the first wave of the pandemic.

The Times of India quoting unnamed persons had recently reported that Munich Re had proposed to hike its rates by as much as 50%.

Reinsurance rates are a key factor that determines the insurance rates on term policies. However, only a portion of term insurance is reinsured.