Premiums on new life insurance premiums for term plans and endowments increase

  • Premiums for life insurance policies are expected to rise in the near future as insurers seek to offset increased claims due to increased deaths from the pandemic.
  • Insurance companies say claims have increased 2-3x since the pre-covid period and are hurting their margins.
  • “The claims that the life insurance industry receives in a full year, we just received them in the first six months of this financial year,” said Manoj Kumar Jain, Managing Director and CEO of Shriram Life Insurance at Business Insider.
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Life insurance companies plan to increase the amount of premiums on life insurance plans, including term plans and staffing plans. At least two insurance company CEOs confirmed this to Business Insider. One of them, Shriram Life Insurance, is planning to increase the premium while Bajaj Allianz has already implemented part of the planned premium increase.

The premium hike comes as life insurance companies grapple with the highest claims due to rising deaths from covid-19.

However, the premium hike will only apply to customers purchasing new policies. For existing insureds, the premium will remain the same.

“Life insurance claims have increased two to three times from pre-covid levels, especially during the second wave of covid-19. Not only in the term plan, even in the endowment plan, most companies are looking to revise the premiums. We are also in the process of increasing capital accumulation plan premiums by 2-5%. In term plans, the premium increase will be higher as it is a pure risk plan,” Manoj Kumar Jain, Managing Director and CEO of Shriram Life Insurance told Business Insider.

The endowment plan is a life insurance policy that provides you with a combination of the two i.e. insurance coverage and a savings plan.

“And that’s not the phenomenon just with Shriram Life Insurance, but in the industry as a whole, one in two companies will raise premiums. Indeed, whatever claims the insurance industry– life receives in a full year, we just received them in the first six months of this fiscal year, and a lot of them are Covid-19 related claims, which puts a lot of pressure on our underwriting margins added Jain.

Reports also say that the increase in claims has made it difficult for reinsurers to offer cover at older rates. And, price hikes by reinsurers mean companies will have to raise the cost of premiums.

“The pandemic has heightened consumer awareness of the benefits of life insurance, and we have seen term plans being increasingly purchased. At the same time, the industry has also planned and strengthened its reserves for COVID-related claims. We also observed that reinsurers were affected at the time, and as a result of their valuation processes, we saw an increase in term plan prices, which resulted in an increase in premium rates for forward plans,” Tarun said. Chugh, Managing Director and CEO of Bajaj Allianz Life Insurance.

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