Life insurance premium may come down soon

Life insurance premium to be paid by young people and those between 50-60 years will fall soon as the Insurance Regulatory and Development Authority (Irda) is about to approve the new mortality table that will show higher life expectancy.

The impact will be most on pure insurance or term plans, and senior Irda officials said premium could fall 10-15 per cent. There will be a drop in premium of unit-linked insurance plans (Ulips) and endowment plans, which are insurance-cum-investment products.

“We are studying the data. We will soon approve it,” a senior Irda official told Financial Chronicle. The data were collected by Life Insurance Corporation and private insurers. The new table will be driven by the experience of LIC, which has a market share of over 65 per cent and a major chunk of traditional products portfolio.

The new mortality table is based on 2008-10 data and it was prepared by a committee made up of members of the Mortality and Morbidity Investigating Centre, an affiliate of the Institute of Actuaries of India, actuaries and members from the industry.

Life insurers now use LIC’s 1994-96 table, which was based on claims over the years, because private players started operations only in the past decade.

The table only provides mortality rate per thousand. According to Irda officials, the new table will have location-based information. “The country has been divided into five groups, with states falling into one of the groups based on life expectancy in the state. The new table will also contain data on gender and life expectancy of smoking and non-smoking population," said an official.

GN Aggarwal, chief actuary, Future Generali Life Insurance, said, “There will be a slight reduction in premium. Even though all companies use LIC data, they take into account that the data is old, so reduce the standard premium.”

Aggarwal said insurance companies had been reducing rates across segments over the years. “Premium has gone down 6-7 times in the past one year,” he said.

Mortality table indicates the rates that are to be charged on people of different age groups based on average life expectancy of a person in that age group. As a country develops and prospers, better health care and improved lifestyle lead to an increase in life expectancy, which is reflected in reduced mortality.

A senior industry official said life expectancy has improved by around 20 per cent over the past 10 years.