The impact of the Covid-19 pandemic has had a huge impact on the life insurance industry. With mortality rates skyrocketing, the popularity and interest in life insurance plans have also boomed.
However, come December and January, the term insurance market in India is due for an upheaval that has not been witnessed for many a year.
What does this upheaval mean for you, the customer?
From December 2021 and January 2022, new term insurance customers will pay premiums that are anywhere between 25–40% higher than earlier premiums. This hike in premium rates is applicable on both offline and online insurance plans.
Over the past six years, online insurance plans gained popularity due to their convenience and lower premiums. However, with the impending hike in premium rates, online insurance customers will find that they are paying higher premiums than earlier policyholders.
What Can You Do?
If you don’t already have a term insurance policy, now is the time to buy one. Keep in mind that insurance companies do not raise their premium rates all in one go. So take advantage of the staggering increase in hikes to purchase a term insurance policy at the earliest. Remember, term insurance premium rates are locked in for a period of 20 to 40 years, so it’s best to buy a term insurance policy before premiums rise.
What Does The Rise in Rates Mean for Existing Policyholders?
As term insurance premiums are locked from the date you purchase the policy, existing policyholders will not see an increase in their premium rates. Existing premiums will remain unaffected by any future premium hikes.
Why is This Rise in Premiums Taking Place?
In 2021, life insurance companies received four to five times death claims as compared to 2020 due to Covid-19. As of October 2021, insurance companies paid Rs 12948.98 crore in claims settlement. This increase in claims has prompted international reinsurers to hike their rates to ensure higher profitability.
One of India’s largest international reinsurers, GIC Re had hiked their rates earlier this year, and Munich Re, another international reinsurer, has also informed insurance companies that prices will be hiked in December.
What Will be The Impact on Term Insurance Policies in India?
Term insurance companies in India are wary that increased rates will lead to a decrease in demand. There has already been a round of hikes in premiums since the start of the covid-19 pandemic. Those hikes were in the range of 10–15%. But this upcoming hike in rates will be the most significant one in the last decade.
For many years, the USP of term insurance has been its affordability. Despite that, term insurance has not been a priority for most Indians. So, insurance companies are concerned that just when awareness and acceptance of term insurance have increased, increased rates will put off potential customers.
The insurance company may choose to pass on all or a majority of the hike to their customers. Some insurance companies, however, may absorb a part of it. Large insurance companies with some bargaining powers are negotiating with the global insurers to minimise the hikes being imposed. Ultimately, how the increased rates impact policyholders will be dependent on the insurance company’s business strategy.
Is Term Insurance Still Worth it?
Before the covid-19 pandemic, most Indians might have bought insurance as a tax-saving method. The pandemic has caused many people to rethink this perspective. More and more people are looking to protect their families financially in case of their untimely demise, and a term insurance plan is a way to do this without breaking the bank.
Term insurance plans are comparatively low-cost and high-coverage in nature as they are pure protection plans. So, despite the rise in premium rates, financial advisors opine that term insurance policies are still worth the increased rates.
A term insurance plan is an economical way to protect your loved ones from financial uncertainty in the event of your death. And while a rise in premium rates for term insurance seems inevitable, that should not deter you from purchasing a term plan. Take a stand for your family’s security and purchase a term plan today.
ReferrencesTerm insurance premiums are set to rise from December: Here’s what you should do
Term insurance premium set to rise up to 40% from December 2021 | Know why
Covid impact: Term insurance premiums to rise up to 40% as re-insurers push up rates
You may have to pay 20-40% more for life cover next year