The premium rates of term insurance will get expensive from 1 April, 2021 due to increasing death claims on account of COVID-19 as well as increase in reinsurance rates. In reinsurance, there is involved a reinsurer who assumes part of the risk taken by the primary insurer/insurance company or other reinsurer for premium charged to the insured. As there is seen a threat of second wave of Corona Virus in regions such as South East Asia (including India), the UK and the US, reinsurers globally have increased rates.
This hike in premium rates will only for the private life insurers. According to the India head of a global reinsurer, “Private insurers don’t have the flexibility to bring down rates with global reinsurers. LIC is able to do that and hence their premiums are not being hiked.”
For the larger risk coverage offered, the insurers pay reinsurance premium to the reinsurers to get partly covered or the risk component is partly shared between the primary insurer and reinsurer in simple terms. And in a scenario when reinsurers increase rates, the end purchaser of the insurance policy has to pay a higher premium price.
