Insuring life is set to get more expensive and harder in the fiscal year starting April, writes The Economic Times. Increased comorbidity risks due to the pandemic and the adverse loss experiences of global reinsurers are set to weigh on how life covers are priced.
Over the coming months, the premium on term covers is set to be raised at least 10-15% by most private sector insurance companies amid a hardening of rates by at least one large foreign reinsurer – Swiss Re — to curtail losses, according to industry executives and experts.
At least five private insurers – Tata AIA, Aegon Life, Max Life, PNB Metlife and IndiaFirst Life – have already filed for new term products with the insurance regulator at increased prices for the new fiscal year. Other life insurers may soon follow.
“Reinsurance contracts will set in from April 1,” said a person aware of the matter.
Moreover, reinsurers also want Indian life insurers to overhaul underwriting practices to make them more stringent and standardised. Therefore, rejection rates for insurance policies, especially for those prone to comorbid risks, could also increase.
“There is a view that reinsurers can’t support term prices in India, which they feel don’t adequately capture the risks," said the person. "Across the world, disproportionately, FY21 for most global insurance companies was one of the heaviest loss-making years in history. The decision to harden the rates is seen as an attempt to recoup some of these losses."
The coronavirus pandemic merely advanced the price hike as the country’s life insurance industry was already of the view that the prices were too low to stand the scrutiny of market principles, said Institute of Actuaries of India (IAI) president Subhendu Bal.
According to the chief executive of a leading private insurer, the price rise of term products could be in tranches and in the form of new products as the Insurance Regulatory and Development Authority doesn’t allow any sudden revision in term rates.
"Insurance is a heavily regulated industry and any proposal to revise term rates incurs regulatory scrutiny on various counts," the executive said. "We may see several new products getting filed in FY22 which would reflect higher risk pricing."