Will the Covid-19 third wave impact life insurance premium rates?

Following a surge in premium rates by reinsurers, several life insurers have recently increased term insurance rates by 20-30 per cent.  The rate hike came after the severely-damaging second wave of Covid-19 during April-May'21, and led to a sharp rise in claims affecting margins of insurance companies. As the impact of the third wave is yet to be studied completely, life insurers are taking a cautious "wait and watch" approach before deciding on raising premium rates. 

"In line with the mortality experience over last couple of years, reinsurers have increased their rates by approx. 30 per cent in the past year. This has led to almost all life insurance companies increasing their premium rates by over 20 per cent," says Rushabh Gandhi, Deputy Chief Executive Officer at IndiaFirst Life. 

Gandhi adds, "Thus far, the experience of the third Covid wave isn't as fatal as the first two waves. The mortality rates continue to remain in check due to the vaccine penetration in eligible population. However, as the impact of the third wave is yet to be completely studied and understood, life insurers are taking a cautious "wait and watch" approach.  While we, at IndiaFirst Life, don't anticipate a further increase in premium rates in this FY, we are adopting a more vigilant approach towards underwriting." 

Rakesh Goyal, Directer, Probus Insurance, says, "HDFC Life, ICICI Prudential and Bajaj Allianz Life are the companies that have increased the term insurance rates so far. Furthermore, other insurers are also expected to increase their rates. The re-insurer player had asked the prices to increase by 40-50 per cent, but insurers have only increased it by 20-30 per cent."   Also Read: COVID-19 patients may have to wait 3 months before buying a life insurance cover

Goyal adds, "Still, it's too early to predict the impact of third wave. While the cases have been on the rise in the last few days, but there are no deaths due to the latest variant compared to the second wave. If in the coming days things go out of control and there are more casualties then there will be revision in rates of term plan going forward."  

According to PolicyX.com's 'Insurance Price Index' the Term Insurance Price Index Value has gone up by 4.18 per cent in Q4, 2021. The PolicyX.com report marks a huge difference of 9.75 per cent in the term index value between Q1, 2021 and Q4, 2021.  

A life insurance report from Emkay Global Financial Services states considering deteriorating claim experience by reinsurers in pure protection, the reinsurance price hike was imminent even before the severe second Covid-19 wave, and it was happening selectively (selected products and insurers) over the last few years. The spike in claims caused by the second wave meant that the reinsurers needed to take a steeper hike, and that too sooner, to recoup some of the losses due to the spike in claims and to offset the poorer-than-expected mortality experience in the individual protection portfolio in recent years. 

What should one do?  

"The right method is to buy early in life. As the major price changes are reflected in the older age categories carrying the higher risk of lives. Another essential practice is to compare prices before buying as different companies offer different prices thus you must compare their premium prices online before making the purchase," says Naval Goel, Founder and CEO, PolicyX.com.  

Also Read: Covid health insurance policies to also cover expenses for treating Omicron: IRDAI