Pay 40% More For Life, Health Insurance Premium From This Date: Find Out Why?
The business of Life insurance is a tricky one. It drives on the fear of humans. Fear of damage and loss of life keeps the insurance industry going. When the pandemic hit the world, people naturally turned to insurance companies. Insurance companies saw demand like never before. They also settled a lot of claims, the number of which had increased exponentially.
This increased demand and claims are causing a kind of imbalance of supply and demand for money. To balance these, the insurance companies seem to have come up with a solution that will cost dearly to customers.
Life insurance premiums are set to increase in 2022
According to reports, Life insurance premiums are set to increase in 2022 as large reinsurance companies are likely to raise charges. These increased charges are likely to be passed on to customers.
Even though higher premiums may mean higher profitability for insurers but this could also impact demand for policies. Expectations are that premiums will rise between 20% and 40% as reinsurers will look to cover for increased losses.
Already, many companies have applied to the Insurance Regulatory and Development Authority of India (IRDAI) seeking permission to hike charges while some are negotiating with global reinsurers to minimize the hikes. The sale of both online and offline policies will be impacted after this decision. This will be the first time the online market will witness a shake-up in at least six years.
The effect might be different for corporate insurers
It is expected that smaller insurance companies might have less bargaining power with reinsurers, larger companies are still negotiating to keep the hike at the minimum. LIC chairman MR Kumar said his company is still negotiating with reinsurers as the surge in Covid cases is now behind us and companies have still made a profit despite settling a high number of claims.
He cautioned that a rise in premiums could hit demand. “Now is the time people are buying term plans because the awareness is there and we don’t want people to turn away and say things are becoming costly. If they hike rates it will have an impact. The treaties (with reinsurers) are likely to be signed in Q4 (2021) and we will know then,” Kumar added further.
The point to be noted is that life insurers could still make more profits as the higher premium rates will make up for less number of policies sold. Also, on the face of it, a one-off event like Covid-19 helps insurers argue a case for higher premiums, the claims are likely to fall in subsequent years but the higher premiums will stay.