Life Insurance Policies: Standard term life insurance policies are easier proposed than done

Mumbai: the attempt by Irdai, the insurance regulator life insurance more inclusive for the middle and low-income population by requiring all insurers to sell a standard term policy has raised the main challenges in assessing mortality risks further amplified as a result of the ongoing pandemic.

The Saral Jeevan Bima, India’s first standard term coverage, due to hit the market in January 2021, will be priced nearly two to three times the average premium rate charged in the industry for term coverage.

Lack of reinsurance support for the product due to unreliable data on the mortality experiences of the main target market segments – including the self-employed and low-income groups – amid the ongoing pandemic has led to a strong mismatch in premium reported by several private insurance brokers according to sources in the knowledge.

“This is a complicated product to insure and there are hardly any reinsurers that support this, which is why insurers keep the risks in their Prices, ”Said the CEO of a leading private life insurance company.

“What the industry needs is a robust internal risk assessment model to give a fair price and cover as many people as possible,” said the director.

According to Santosh Agarwal. Chief Business Officer – Life Insurance, Policy BazaarThe inclusive nature of the coverage and the existing competitive prices on forward covers allow the product to be priced on the higher side.

“The coverage focuses on the self-employed and middle-income groups,” said Agarwal. “Because insurance companies can no longer discriminate on the basis of income, profession or education and the existing prices are already low, we can expect this product to be priced somewhat higher.

For at least four private insurance companies, the annual range of premiums for £ 25 lakh coverage for a 35-year-old non-smoker will be between £ 12,000 and £ 18,000, the sources said.

This is significantly higher than the range of ₹ 6,000 to ₹ 10,000 where term life insurance is typically made available by insurers for both group and retail policies where actuarial assumptions underwriting standards are much stricter.

Another industry CEO, who also asked for anonymity, said pandemic-related risk assessment challenges and a lack of reliable death experience data also skew product pricing.

“There are two broad challenges: the target segment does not have very reliable data on mortality and pricing in the middle of a pandemic,” said the director. “The question is also how many reinsurance support companies can amass, which would determine pricing.”

An industry committee has further recommended the insurance regulator to extend the launch deadline by one month to January to ensure the industry is ready to market the product on a large scale, a source said.

Standard term life insurance is easier proposed than done

However, Policybazaar’s Agarwal added that the value proposition for those without any life insurance coverage who choose to purchase the Saral policy is undeniable as the amount insured and other protection benefits can go a long way in ensuring household financial security.

Designed by the Irdai as an unaffiliated, non-par protection policy, families insured under Saral Jeevan will receive a specified payout in the range of ₹ 5 lakh to ₹ 25 lakh in the event of death.

“The standard product – Saral – would go a long way in making life insurance easier to understand. It also targets the missing middle income groups that are undervalued in the current plan of business, ”said NS Kannan, the CEO of ICICI Prudential Life Insurance.

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