I have a life policy. I want to know how the insurers calculate mortality charges. Do they hike the charges every year with increase in age or keep it fixed at the age at which the policy was taken?
Anirudh Bhasin, Noida
Mortality charges are a function of actuary calculation made by professional and experienced actuarial managers. It is important because sufficient experience and skill goes into calculation of mortality charges which form the basis of premiums paid for various age bands.
Mortality charges calculation is based on a number of factors:
For life insurance policies premium rates are not hiked every year because the probability of losing a lifein a pool of insured policy holders is lower.
For health and general insurance policies, the premium rates are reset every year and increase by 10-15 per cent per annum depending on profitability of the company and positive claim ratio the company has earned over the years.