Term Insurance Rates Might Fall Further in India

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Term Insurance Rates Might Fall Further in India
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• Typically, a life insurance policy has two
  components- protection and savings/investments.
  IRDA, through their latest guidelines on ULIPs
  have ensured that the various charges on the
  savings/investment component of the life
  insurance policy will become cheaper. But now, a
  further change is on its way which will benefit
  policyholders- the mortality charge, ie the
  premium that a person pays for the life cover-
  might also reduce.

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• In India,
  mortality charges have primarily been defined by
  the 1994-96 LIC table. For example, the
  probability of death of a 40 year old was taken
  as approximately 2 per thousand while that of a
  60 year old was taken at about 13 per thousand.
  Since then, life expectancy has gone up. Data has
  been collected from LIC and the private insurers
  and this has been submitted to IRDA. Actuarial
  departments indicate that the death rates may
  have come down by 20-25 in the higher age
  bracket. This might lead to a reduction of 15-20
  in the mortality charges. The new table has been
  prepared and takes the variables of gender, age
  and geography into account. Earlier, the tables
  only considered gender and age.

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• The reduction in mortality charges might not be
  uniform across segments. Our view is that
  premiums for younger people will reduce more, for
  middle aged people it would be less changed, and
  the jump in premium that we used to see for
  higher age brackets would reduce.
• The impact of these reduced charges might be seen
  most in pure term policies. However, many private
  insurance companies had started following their
  own mortality tables and had reduced the premiums
  for pure term policies aggressively. In the light
  of the new change brought about by IRDA where
  life insurance policies have a minimum sum
  assured of 10 or 7 times the annual premium, this
  impact will also be felt on the ULIPs which are
  extremely popular in the market. For traditional
  policies, the impact could be in the form of a
  higher declared bonus rates.

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• Of late, we have seen life insurance companies
  aggressively promoting term insurance products.
  Also, by their very nature, term insurance
  products lend themselves very easily for online
  buying and Online Term Insurance India on
  insurance comparison sites such as With a further
  fall in rates, action in this segment is sure to
  increase.

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