Analysis and Insights from Pricing of Term Insurance
from leading insurance companies in India.
The Term Insurance Price Index marked a considerable jump with a 4.18% surge in the premium value in Quarter 4, 2021. The index value increased to INR 23,929 in this quarter from INR 22,969 in Quarter 3, 2021. Simultaneously, the difference spotted in the Term Insurance index value was 9.75% between Quarter 1, 2021 and Quarter 4, 2021.
The average annual premium payable for a sum assured INR 1 crore increased to INR 30,720 in Quarter 4, 2021 compared to INR 29,443 in Quarter 3, 2021.
Experts have attributed this surge as an attempt to manage financial pressure caused to the insurers and reinsurers, due to the continuous incidence of Covid related claims in the previous quarter; leading to a similar trend of price hike in Quarter 4, 2021 too.
It is important to note that this is an illustrative example based on multiple variables such as age, gender, and tobacco usage. Actual values may differ financially as per the plans chosen and personal information.
Term Insurance Prices, being highly vulnerable to external factors such as competition, mortality rate, and demand, often leads to the change in the average premium prices. The premiums indicated in the illustration are the average premium prices taken from the top 5 life insurance companies.
The Quarter 4, 2021 Term Insurance Price Index observed that the Non-Smoker 25-year-old Female paid an average premium price of INR 5,551 and Smoker Female paid an average premium price of INR 7,998 for INR 50 Lakh sum assured cover. Likewise, the Non-Smoker 25-year-old Male paid an average premium price of INR 6,136 and the Smoker Male paid an average premium price of INR 8,930 for INR 50 Lakh sum assured cover.
| Age | Gender | 50 Lac | 1 Cr | Average Premium | ||
| Non-Smoker | Smoker | Non-Smoker | Smoker | |||
| 25 | Female | 5551 | 7998 | 9416 | 13518.4 | 9121 |
| Male | 6136 | 8930 | 10526 | 15169 | 10190 | |
| 35 | Female | 7946 | 11462 | 13524 | 19644 | 13144 |
| Male | 9337 | 13571 | 16029 | 23487 | 15606 | |
| 45 | Female | 13261 | 19707 | 23462 | 35073 | 22876 |
| Male | 16189 | 24263 | 28830 | 43424 | 28176 | |
| 55 | Female | 23314 | 35521 | 42871 | 65378 | 41771 |
| Male | 28048 | 42962 | 51778 | 79392 | 50545 | |
| Avg Premium | 13723 | 20552 | 24554 | 36886 | 23929 | |
*Source: Average prices have been determined from the leading 5 Term insurance companies in India. These prices are for illustration purposes & the actual price may vary depending on the insurer, age, gender, health condition, Sum Assured & Coverage type.
Of the 5 insurers forming the price index, 3 insurers hiked premiums in Quarter 4, 2021, whereas, other 2 insurers remained their premium prices constant in the same tenure for term insurance plans. The biggest jump witnessed in the term insurance prices was 13.4% followed by 4.9%, 0.9% in the last quarter.
*Note: SBI Life Insurance, TATA AIA Life Insurance, Aditya Birla Sun Life Insurance, Canara HSBC OBC Life Insurance & Life Insurance Corporation of India have been removed from index computation due to the unavailability of data.
Analyzing on the basis of the age factor, the Term Insurance premium price variation widened with the increasing age of an individual in the last Quarter. Delaying a purchase of term policy by 10 years could cost on an average 48.9% higher for a 25-year-old, 77.6% higher for a 35-year-old, and 80.8% higher for a 45-year-old.
Following are the shifts observed in premiums payable at a difference of 10 years:-
| Age Brackets | % Change in premium prices |
| 25-35 | 48.9% |
| 35-45 | 77.6% |
| 45-55 | 80.8% |
As per the insurance norms, the Male audience carries a higher risk of life than the Female audience. Thus, the Term Insurance Price Index Quarter 4, 2021 observed a premium variation of 20.25% in terms of gender. The male category seems to pay higher term insurance premium prices vis-a-vis the female category.
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Calculate NowAnother remarkable factor to cast an impact on the Term insurance premium price is the Smoking habit of an individual. In Quarter 4, 2021, the smoking habit has laid a larger effect in the higher age group categories of both, Male & Female categories.
The Smoker Male category paid INR 31,400 premium vis-a-vis Non- Smoker Male that paid INR 20,859 premium. Likewise, the Non- Smoker Female category paid a premium as low as INR 17,418 compared to the Smoker Female category paid INR 26,083 premium for term insurance schemes.
The prices and charts displayed above are based on the average premium prices of the top 5 life insurance companies in India in terms of their GWP. The companies considered in our analyses are Kotak Life Insurance, HDFC Life, ICICI Prudential, Max Life, and Bajaj Allianz Life.
The prices represent the average annual premium payable (as of the quarter ended December, 2021) against a sample profile based on age, gender, and smoking status. In addition, the analyses also factor in the sum assured and the policy type (Term Insurance) for a comprehensive evaluation. It is important to note that the insurer's individual rate may vary depending on age, gender, health profile, sum assured & coverage type.
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