Premium is expected to be "very steep" as re-insurers are demanding 200 to 400 per cent rise on their base rates
Kolkata, Dec 31: The new 'Saral Jeevan Bima' or standardised term policy that all life insurance companies were asked by IRDA to launch from January 1, 2021 maybe saral on various aspects but premium is expected to be "very steep" compared to similar existing policies, insurance officials said on Thursday.
They said premium is expected to be "very steep" as re-insurers are demanding 200 to 400 per cent rise on their base rates for this "low ticket" policy underwriting.
If product pricing is not in sync with the existing products then saral term policy would remain a non-starter, they claimed.
Standardisation of term policy is the brainchild of the regulator--Insurance Regulatory and Development Authority (IRDA) in line with previous standardised products on corona and health covers.
"We have applied with the IRDA seeking 200 to 400 per cent hike than comparable products. The premium for the Saral Jeevan Bima is targeted at the low ticket population and underwriting experience is very bad in terms of mortality and frauds," a top official involved in product designing of an insurance company told PTI.
"As this policy will not have rigorous underwriting scrutiny, the risk factor is far more higher and so the premium," sources said declining to be quoted.
No life insurance company had formally announced the launch of the product including Life Insurance Corporation of India though many had already applied for approval with the IRDA.
There could be a delay for some more days before products are actually launched as companies had represented an extension.
"In the recent past 'term' premium rates in the industry had increased in the range of 25-30 per cent in various age brackets after reinsurers raised tariffs. The revisions are based on mortality experience and reinsurer inputs," Kotak Mahindra Life Insurance Chief Distribution Officer Suresh Agarwal said.
"We have designed the product as per the guidelines issued by the authority. The same has been filed with the regulator and it is awaiting final approvals. We will be able
to share the premium rates once the required approvals are in place," he said.
Speaking about the product, several insurance companies did not show much keen interest as it seemed they were forced into an "unknown territory".
Regulators had ensured launching of standardised new products like Corona Kavach, Corona Rakshak, and Arogya Sanjeevani.
This standardised term policy will have a standard wording for sum assured with uniform features that will reduce the hassle of first-time buyers.
This standard term plan will be available for buyers between 18 and 65 years of age. The maximum age at maturity is 70 years, which implies that when the person reaches that age, the plan will automatically terminate.
The policy term can be between five and 40 years. This will be having a minimum and maximum sum assured of Rs 5 lakh and Rs 25 lakh, respectively.
Unlike other term plans which consider your annual income as a fundamental premise to decide the amount of the sum assured, this term insurance plan allows you to buy the sum assured as per your wish without taking into consideration your annual income.