Group term insurance policies may become costlier, here's why
In India, while a small part of the life insurance business is reinsured by GIC, a larger part is written by foreign players
With risk perceptions changing globally due to Covid-19, leading to higher claims expectations, foreign re-insurers are viewing India as an additional risk. Experts feel that with many group-term insurance policies coming up for renewal, reinsurers are either increasing the premium rates or avoiding companies with high-risk profile. Under group term insurance, a company pays an annual premium to the insurance company and in return, the insurance company pays the sum insured to the family of the employee in case of sudden death.
“Today, re-insurers are seeing India as an additional risk due to rapid rise in Covid-19 cases over the last one month. Group term insurance is a short term contract of a year and presumably, this pandemic will also stay for a short period only. Hence, the coverage is coinciding with the casualties. Unfortunately, we cannot spread this risk over the long term. The rates may be different next year if all people get vaccinated and things get under control,” said Praveen Menon, Chief People Officer at IndiaFirst Life.
Insurance is a protection for the individual, whereas reinsurance is the protection taken out by a large insurance firm to ensure that they survive large losses. Any hike in premium rates by reinsurers is finally passed on to the policyholders. In India, while a small part of the life insurance business is reinsured by GIC, a larger part is written by foreign players. GIC Re mainly provides reinsurance to the general insurance companies in the Indian market.
“Yes, for the past two months, there has been resistance by reinsurers in the world for writing such business. Therefore, it is not impossible but definitely difficult to get a quote. We had issued a policy to a corporate with a group size of 1400 at the rate of Rs 74 for every lakh, much lower than PM Jeewan Jyoti at Rs 165 for every lakh. With increased claims, every business or insurer has the right to increase the rates,” said SK Sethi, director and founder, RIA Insurance Brokers.
The single-day rise in new coronavirus infections inched closer to 3 lakh, pushing India’s total tally of COVID-19 cases to 1,56,16,130, while the death toll increased to 1,82,553 with a record 2,023 daily fatalities, according to the Union Health Ministry data updated on April 21.
“This is not a blanket scenario, as it can be very company and product-specific. Risks perceptions have changed globally. leading to higher claims expectations in some lines. Correspondingly, premium rates would have to change. Given the uncertainty, there might be some caution, even reluctance in writing group term insurance business,” said Alok Kumar, founder and CEO, SmartCover Solutions.