Term insurance policy premiums are set to hike anywhere between 25 per cent to 40 per cent as reinsurers tightened underwriting norms in the wake of the Covid-19 pandemic. The extent of the premium hike will, however, vary from one insurer to another. The new rates will come into effect from December.
Covid-19 death claims in Q1 were higher than the cumulative claims in the entire FY21. As per the report, post pandemic's second wave, Life insurers have so far shelled out Rs 11,060.5 crore to settle Covid-related death claims.
As of October 21, life insurers settled a little over 130,000 Covid-19-related death claims. About 140,000 Covid-related claims have been made so far, amounting to Rs 12,948.98 crore, of which 93.57 per cent by volume and 85.42 per cent by value were settled, a Business Standard report stated.
Following the claims burden, Munich Re, the largest reinsurer for the Indian insurance market, is set to hike its rates for underwriting portfolios of pure protection plans by up to 40 per cent.
Effect of a surge in claims post Covid-19 second wave
The worsening mortality experience for life insurers in the country accentuated by the pandemic has prompted reinsurers to re-evaluate their prices on term plans. Munich Re has intimated to insurance companies, whose risks it is covering, about a price hike.
The global reinsurer has communicated its decision about increasing rates, according to a senior executive of a private life insurance company.
About 8-10 insurance companies have been informed about the move, sources told Business Standard.
As Reinsurance rates hiked by up to 40% and Premiums are likely to increase by 30%, depending on age, sum assured and quality of life of the individual.
“The reinsurer has increased its rates for term policies by 30 to 40 per cent across various companies. This will lead to an increase in the premium rates by 25-30 per cent,” an executive said.
Apart from increasing reinsurance rates, the German multinational insurance company has also tightened underwriting standards.
This is the second time reinsurance rates have been hiked in 2021.07-Oct-2021. In March, the rates were raised by 4-5 per cent. In June last year, there was a steep hike of 20-25 per cent.
Life insurance companies in India have received four to five times Covid-related death claims in FY 2021 as compared to the last fiscal year, which has resulted in huge losses for them. Following this, Insurance firms are engaged in discussions with the reinsurer on the quantum of the hike.