Tag: life insurance

How to save on premium in life policies

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The recent pandemic has shed light on the importance of life insurance. While the awareness for life insurance has increased, you may be able to save on it if you know about key factors that influence life insurance premiums.

Age

The age of the life assured plays a critical role in determining the premium. The mortality rate, i.e. probability of death, increases with age. Therefore, a person with a higher age shall be required to pay higher premium than a younger person. Based on the IALM (Indian Assured Lives Mortality) 2014-16 table, the mortality rate at age 50 is 380 per cent higher than the mortality rate at the age of 20. Additionally, as per the mortality tables worldwide and experience, women are likely to have 30-35 per cent lower mortality than a man of similar age. Therefore, women are likely to be charged lower premiums than men.

Lifestyle matters

Health parameters and lifestyle choices also play an essential role in determining life insurance premiums. Higher BMI (body mass index) indicates overweight or obesity leading to many medical complications including diabetes and cardiovascular problems. The mortality rate for an obese person is likely to be higher, and the company may charge an extra premium to cover the additional risk. Moreover, underwriters view excess weight or obesity as one of the major risks to life. One needs to make lifestyle changes to reduce the weight and thereby lower the BMI. Adopting a healthy lifestyle, controlling the intake of calories, and regular workouts will be beneficial. This will help reduce any extra premium loading, which may go up to 50-200 per cent over standard mortality on a case to case basis or may even be declined.

Similarly, smokers tend to have a higher mortality as compared to non-smokers. Therefore, smokers are required to pay higher premium than non-smokers of the same age. The premium for a smoker may be close to 50-60 per cent higher than the premium for a non-smoker.

The same is the case for the consumption of alcohol. Excessive drinking harms one’s health, and the underwriter may load an extra mortality premium of 50-200 per cent or even decline cover for an addicted heavy drinker.

Besides, a history of medical conditions, family history of illnesses (hereditary diseases) could factor into your life insurance premium and increase the cost of your coverage.

Work matters

Hobbies or jobs like skydiving, racing cars which are high risk in nature, could lead to higher premiums by the underwriting philosophy of the insurer. Certain hazardous occupations which expose a person to toxic chemicals or require one to perform dangerous duties may require a higher premium.

That said, for an individual, when it comes to life insurance, a term life cover should be of top priority. While the above are the critical reasons for premium variation, it is easier and cost-effective if a term cover is purchased early for lifelong coverage.

The writer is Chief Actuary and Chief Risk officer, Kotak Life Insurance

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SBI Life launches new age protection plan

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SBI Life Insurance announced the launch of a unique new age protection solution called ‘SBI Life eShield Next’, which ‘levels up’ the protection coverage as the insured achieves life’s major milestones.

It is an individual, non-linked, non-participating, life insurance pure risk premium product and works by ‘levelling up’ the required insurance protection, through an increase in sum assured linked to the significant ‘level-up’ milestones in one’s life, like getting married, becoming a parent or buying a new house, the insurer said in a statement.

“As we progress in life, our term insurance should be able to intelligently take care of our needs as we progress through life’s important milestones. SBI Life eShield Next, with its three plan options, offers a distinctive customization feature that caters to the evolving needs of the consumer,” said Ravi Krishnamurthy, President, SBI Life Insurance.

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Covid claims for life insurers to rise but sector well prepared: Sumit Rai

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The number of Covid related claims for life insurers in the second wave of the pandemic is likely to be three to four times of the first wave, believes Sumit Rai, Managing Director and CEO, Edelweiss Tokio Life Insurance.

“Claims have increased significantly but typically they come with a lag,” Rai said, adding that most life insurers had anticipated it and are prepared for it.

“I don’t expect the impact to be very adverse and don’t think it will set the industry back very significantly,” he said in an interaction with BusinessLine. The impact of the higher claims will be visible on aspects like term pricing, he added.

Edelweiss Tokio settled 487 Covid related claims amounting to ₹45.82 crore in 2020-21. In the first quarter of this fiscal, it has settled 153 such claims of ₹16.39 crore.

RBI report

According to the Reserve Bank of India’s Financial Stability Report, July 2021, the life insurance industry received 22,205 claims worth ₹1,644.56 crore during 2020-21 where death was due to Covid and related complications, which amounted to 0.3 per cent of total premium income of the year.

“The pandemic did not have a significant impact on death claim settlement rates,” it noted.

However, there is concern among analysts that the spike in claims in the second wave could put pressure on the bottomline of insurers in the quarter ended June 30, 2021.

Kotak Life Insurance had said it expects to incur a loss of up to ₹275 crore in the quarter ended June 30, 2021 due to increased Covid claims.

Rai is, however, optimistic about the prospects of the life insurance sector and expects the industry will grow by 12 per cent to 15 per cent in the next few years. “This pandemic has given a fillip to life insurance. On a long term basis, industry will continue to do well,” he said.

Edelweiss Tokio expects to grow at a higher rate than the industry. “Our goal is to grow better than the industry at between 15 per cent to 20 per cent over the next two to three years,” he said, adding that the focus will be to be multi-channel. The insurer plans to launch a new term product as well as a guaranteed return product this fiscal.

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Average ticket size for life insurance increasing: Exide Life CEO

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Not only are more people buying life insurance but the average premium and cover size has also increased, said Kshitij Jain, Managing Director and CEO, Exide Life Insurance, adding that despite the second wave of the Covid-19 pandemic, he expects the life insurance sector to do well this fiscal. “We are selling more policies than last year and we are selling bigger premiums. More people are taking bigger covers. Overall in premium term, industry will see growth this year,” Jain told BusinessLine in an interaction.

On an industry-wide basis, the average premium size has increased every year for the last three years, he said, attributing it to the attractive guarantee products that life insurers are offering. “Over the last three years at Exide Life Insurance, we have increased the average ticket size by as much as 40 per cent. My expectation is that this year, we will grow it by another 20 per cent,” Jain further said.

Upbeat about prospects

Jain is also upbeat about prospects for the life insurance industry this fiscal. “The growth will be a combination of two things. We see a clear trend of customers wanting to buy more protection that they used to. Also, over the last few months, a number of players including our company, are offering attractive long-term guarantees to customers,” he said, adding that the first five to six months of the fiscal will also benefit from the low base of 2020-21.

“Given the Covid-19 pandemic, we have recorded a rise in our protection business. Protection currently makes for close to 18 per cent of our customer acquisition. With increasing awareness about term insurance, we expect this number to go up further,” he further said.

Also read: Exide Life Insurance drops ambition of ‘breakneck’ growth in FY21: CEO

The company expects new business premiums to rise by about 30 per cent this fiscal. The life insurance industry is also well prepared to meet the rising claims due to Covid-19, he further said.

Till March 31, 2021, the company received close to 750 Covid-19 claims and has settled all of them. “Approximately 11.5 per cent of our total claims are on account of Covid-19 and we may witness further increase through the next few months if the pandemic intensifies across the country,” he said.

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Recovered from Covid? It may be difficult to get insurance cover now

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As India grapples with the second wave of Covid-19, many have understood the importance of insurance, both life and health, and are actively signing up for new policies in recent times. However, if you are among those who were unfortunately infected with Covid , and have subsequently recovered, you may find it difficult to sign up for a new policy, particularly a term life policy. This is because insurers are cautious and have tightened underwriting norms, as the after-effects of Covid remain to be seen.

Cooling-off period

In life insurance, while policyholders who had not been infected with Covid and are otherwise found to meet all conditions for coverage are accepted in the usual manner, those who had recovered from the same are evaluated based on factors such as nature of infection, treatment offered and current status.Accordingly, insurers make room for a recovery period. Life insurers including SBI Life and Kotak Life, for instance, have a cooling-off period of 30 to 90 days post which the policy is issued.

According to Sunil Sharma, Appointed Actuary and Chief Risk Officer (CRO), Kotak Mahindra Life, “If the life to be assured has a Covid history, the insurance cover can usually be considered three months post complete recovery, subject to underwriting. Additionally, specific medical tests may be requested on a case-by-case basis based on the information provided, to evaluate the risk”.

At present, post the said recovery period, policyholders are accepted without any need for restrictive clause or increase in premium. Sajja Praveen Chowdary, Head, Term Insurance, policybazaar.com, says, “There is no differential premium as of now between an individual who has recovered from Covid and a healthy person.”

Further, according to industry sources, in the future, if it is proven that there is a lasting health impact due to Covid, then the underwriter may charge additional premium for those who have recovered. This is similar to differential premium charged for a smoker and a non-smoker.

Additional scrutiny

In life insurance, post recovery from Covid infection, policyholders may be asked to submit a Covid negative report in addition to other medical records. Similarly, policyholders may be subject to additional scrutiny if one of the family members tested positive and later recovered or passed away (if they had been living under the same roof).

Also, given that life insurance is a long-term contract with policyholders, there could be a stringent on-boarding process of new policyholders irrespective of whether he/she contracted Covid. For one, almost all the life insurers including LIC and SBI Life have introduced Covid questionnaires where the prospective policyholders have to provide details such as whether they have travelled abroad in the past six months to one year, whether they plan to travel abroad, date of discharge in case of a Covid-19 diagnosis and whether full recovery has been achieved. This questionnaire is to be submitted along with the proposal form while buying the policy.

Delay in health policies too

In health insurance, while there is no cooling-off period or postponement of policy issuance to new policyholders in many cases, the health/general insurers are cautious when on-boarding customers, particularly those who had recovered from Covid. A few insurers including ICICI Lombard, Max Bupa and Manipal Cigna do have a cooling-off period (in the range of 15-90 days) when on-boarding a customer.

Priya Deshmukh Gilbile, Chief Operating Officer, Manipal Cigna Health, says “While the vaccine is a preventive measure, members who have had a Covid infection may have a possibility of future complications. From that perspective, a person who has been Covid-positive but who is getting vaccinated will still undergo the cooling-off period, and it does not have a bearing on premiums.”

Those who have recovered from Covid, in addition to providing details regarding current health condition, may be required to submit medical records, details of treatment undertaken, the severity of infections and past medical conditions and corresponding records, to the insurer. Some insurers require additional medical tests but it differs on a case-to-case basis. “A medical check-up requirement for those recovered from Covid will depend on the extent of the hospital treatment or the level of damage to the lungs and other vital organs,” says Gurdeep Singh Batra, Head – Retail Underwriting, Bajaj Allianz General Insurance.

Many insurers require that if an individual with pre-existing condition such as diabetes, asthma or hypertension has recovered from Covid, he/she may have to undergo further medical tests in addition to submitting a Covid-negative report. However, this is not a universal requirement.

Do note that health policies generally come with an initial waiting period of 30 days..

If you have any pre-existing conditions, there is a waiting period of 2-4 years and there are disease-specific waiting periods as well that vary with insurers. Even if you consider Covid-specific insurance policies like Corona Kavach or Corona Rakshak, there is a waiting period of 15 days.

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Dai-ichi Life Insurance Company appoints Abhay Tewari as MD & CEO

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Star Union Dai-ichi Life Insurance Company Ltd has announced the appointment of Abhay Tewari as Managing Director and Chief Executive Officer.

SUD LIFE is a joint venture of Bank of India, Union Bank of India and Dai-ichi Life Insurance Company Limited, Japan. Tewari joined as Appointed Actuary of SUD LIFE in the year 2014 and was holding the position of Joint President and Chief Actuary until he is elevated as MD & CEO.

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Company posts highest-ever quarterly net profit of Rs 375 cr, BFSI News, ET BFSI

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Aditya Birla Capital on Friday said it has reported the highest-ever quarterly net profit of Rs 375 crore for the fourth quarter ended March 2021.

It had posted a net profit of Rs 144 crore in the year-ago period.

The non-banking financial company said it posted strong growth across businesses leading to delivery of the highest ever consolidated profit, despite a COVID-hit year.

The highest ever quarterly net profit at Rs 375 crore grew by 2.6 times year-on-year.

Revenue during the fourth quarter of the financial year 2020-21 rose by 16 per cent to Rs 5,917 crore as against Rs 5,085 crore in the year-ago period.

For the full year 2020-21, the company’s net profit grew by 22 per cent to Rs 1,127 crore as against Rs 920 crore in the previous financial year.

Revenue during the year rose by 14 per cent to Rs 20,447 crore from Rs 17,927 crore, ABCL said.

The active customer base grew by 22 per cent to 2.4 crore aided by the focus on granular retail growth across businesses.

The company’s AUM (assets under management) across asset management, life insurance, and health insurance businesses rose 10 per cent year on year, to over Rs 3,35,000 crore.

Overall lending book (NBFC and housing finance) grew by 2 per cent, nearly at Rs 60,000 crore.

Gross premium (life and health) grew by 25 per cent to Rs 11,076 crore, with the retail mix at 72 per cent, reflecting the scale in insurance, ABCL said.

The stock of the company closed at Rs 121.35 apiece on BSE, up 1.68 per cent from the previous close.



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How to get back your entire term insurance premium

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Two neighbours’ daily routine of watering plants leads to an interesting conversation

Bindu: These plants give back much more than the time and care we invest in them.

Sindu: Yes. Speaking of giving back, have you heard of the concept of return of premium or ROP in life insurance plans?

Bindu: No. What is it?

Sindu: It is literally what the name means. ROP is where the term plan returns the entire premium paid (excluding tax) during the policy term . A few insurers even return 110-150 per cent of premium paid.

Bindu: Wait. Did you say term plan? Terms plans don’t given any kind of returns to the policyholders. It is a pure risk cover. The policy terminates after the policy term.

Sindu: Yes, exactly. Many policyholders who survive the policy term feel they don’t get anything in return. So for them, term plan with ROP (TROP) variant was introduced.

Bindu: How does it work?

Sindu: Most insurers offer TROP as a rider or optional cover. Upon payment of additional premium, you can buy this cover. Here, you get life cover during the policy term and if you survive the policy term, 100 per cent total premium paid including underwriting extra premium (if any) under the base policy will be paid at the end of the policy term and the policy will terminate.

Bindu: Great! Do we get tax breaks on this as well?

Sindu: Tax benefits available on regular life insurance policies under Section 80C can be availed on ROP term plans too. Maturity benefit, i.e., the premium that is returned, is eligible for tax exemption under Section 10 (10 D). And, unlike the regular term covers, under TROP, the policy becomes paid-up. That is, if you stop paying the premium, the policy will continue to cover you till end of the policy term for a reduced sum assured (SA).

Bindu: Well, this is good!

Sindu: Yes. It appears to be. But hold your horses. There are a few things to keep in mind. One, the premium for this return of premium variant is higher than the plain- vanilla cover. Two, you get only the premium paid for the base cover. That is, if you had opted for any optional or rider covers such as accidental death benefit, critical illness riders or joint life, you will not get back the amount paid. And three, ROP has to be selected at the inception of the policy.

Bindu: Basically, if I don’t mind spending the extra money, then I can go for this cover. It not only protects my family in my absence during the policy term but gives me a financial cushion at the end of the policy term. It is not so bad.

Sindu: True that. But it is still expensive for a term cover. Instead, you can always invest that extra money paid as premium in alternate platforms and consider a plain-vanilla term cover. After all, insurance is for protection.

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Max LifeSmart Secure Plus: Should you go for this multiple-frills policy?

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Max Life Insurance recently launched Smart Secure Plus Plan, a non-linked, non-participating, term life policy. While the loss of a family member is hard to cope with, a term cover can offer financial support to the surviving members. Max Life’s new plan, in addition to providing a risk cover, comes with multiple frills and riders. Should you go for this plan?

Basics

The policy is available for those from 18 to 65 years of age, with minimum sum assured (SA) of ₹20 lakh (minimum SA for joint life is ₹10 lakh). It provides cover up to 85 years of age. The policy offers different premium payment term options — 5, 10, 12, 15 years, and one where you can pay premium till 60 years. Apart from this, regular pay option (where you can pay premium till the end of the policy term) and single premium payment option, too, are available.

Unlike most policies in the market where the policyholder chooses the pay-out (death benefit) for the nominee, Smart Secure Plus allows the nominee to select from three pay-out options — lump sum payment or monthly pay-out or part lump sum and part monthly pay-out. In addition to the death benefit, the policy provides coverage against diagnosis of terminal illness (pay-out subject to maximum of ₹1 crore), post which the policy terminates.

Similar to most term plans, this policy too offers two SA options, to be chosen by the policyholder at the inception of the policy. These are level SA (where the life cover remains constant for the duration of the policy) and increasing SA, where the cover increases 5 per cent every policy year, subject to a maximum of 200 per cent of the base SA.

The policy also offers enhanced features for additional premium, such as joint life cover, return of premium, premium break option, voluntary top-up of SA, accelerated critical illness, accident cover, waiver of premium and critical illness and disability rider.

What’s new

While Smart Secure Plus Plan is, by and large, similar to other term plans with respect to coverage and riders, it has two new features — special exit value option and premium break option.

Under the special exit value feature, a policyholder may choose to exit the policy and receive the premiums paid. That is, you can receive the entire premium paid for the base policy if you are 65 years or you have reached the 25th year (applicable for policy term from 40 years to 44 years) or the 30th policy year (applicable for policy terms greater than 44 years), whichever is earlier.

Though special exit value is offered in-built in the policy (without payment of additional premium), there are certain points to keep in mind. It is not available if the policyholder has opted for return of premium rider. It is also not available if the policy term is less than 40 years. Lastly, when a policyholder opts for special exit value, then only the premium applicable on the base cover has to be paid and not the premium additionally paid on riders or optional covers.

The second feature is premium break, where the policyholder can take a break from premium payment and still stay covered. The policyholder will be allowed to take this break twice during the policy term. If the premium break option is not exercised, the insurer will waive the last two policy year premiums. But the option is available only for policies with a policy term greater than 30 years and premium payment term greater than 21 years. The feature is available only under the regular pay and premium payment term till 60 years options.

Do keep in mind that this feature is available only on the payment of additional premium. Further, the first break is available only after the completion of 10 policy years and the premium waived includes base cover premium, accelerated critical illness benefit premium and accident cover premium. The second premium break can be exercised after a minimum gap of 10 years from the first premium break.

Both features have to be opted for at the inception of the policy.

Our take

When it comes to life insurance, it is best to go for a basic term plan, which is the cheapest life cover available in the market today. You can consider adding accidental death benefit and critical illness riders to your base plan and go for the ones available at a suitable premium.

When other riders like return of premium and waiver of premium are added to the policy, including Smart Secure Plus, the premium becomes steep. So for a 30-year old for SA of ₹1 crore (40-year term), with return of premium, the premium works out to ₹18,658 per year (including tax). But, a pure term life cover for the same person will cost about ₹7,300-12,000 a year.

The premium break option may not be useful for many as the income of an individual is likely to increase as he/she ages. Further, if there is any financial strain, he/she might as well go the special exit or early exit option instead of selecting premium break (for extra cost).

While it is advisable to stay covered for maximum number of years, the policy’s special exit options come in handy, particularly if you are in need of money. But you may not be able to avail this exit if you miss the said timeline (25th or 30th year). However, if you still want to exit the policy earlier, the insurer provides an option for early exit as well, but you may not receive the entire premium paid.

To sum up, you could go for this policy for its pure vanilla cover and special exit option. But if you want to go for online term plans, there’s a wider basket of policies to choose from.

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Pramerica Life Insurance appoints Kalpana Sampat as MD, CEO

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Private life insurer Pramerica Life Insurance on Monday announced the appointment of Kalpana Sampat as its Managing Director and Chief Executive Officer, effective April 9.

Prior to this appointment, she was the Chief Operating Officer of the company, a release said.

“Sampat is a respected leader in life insurance with an exceptional record. The board is optimistic that the company can deliver substantial strategic and operational progress under her able leadership,” Pramerica Life Insurance Chairman Sunil Kumar Bansal said in the release.

Before joining Pramerica Life Insurance, Sampat was the CEO for Swiss Reinsurance Co, India branch, and was instrumental in its launch in 2015.

Pramerica Life Insurance is a joint venture company of Prudential International Insurance Holdings, a fully-owned subsidiary of Prudential Financial, Inc., and DHFL Investments Limited (DIL).

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