The massive increase in the number of claims due to COVID19 led to a jump in premiums for health insurance and term life insurance in the second quarter of FY21 by 4.87 per cent and 2.79 per cent respectively, said a report by Policyx.com.
“Health Insurance Price Index witnessed a major shift in the second quarter with an increase of 4.87per cent, taking insurance premium prices to Rs 25197 in the index value.” said the report by Policyx.com
Reasons for increase in health insurance premiums
Apart from increasing claims from Covid, the additional coverage of several diseases such as mental disorders, genetic diseases, neuro-related disorders, psychiatric disorders, etc. is responsible for the sharp increase in the health insurance premium prices.
Additionally, health insurance premium increases with age as the chances of health problems also goes up, leading to increase in claim frequency. As per the findings of Q2 2021 report by Policyx.com, the average premium for a 36 years old individual is Rs 16,740 higher than the average premium for 26 year old i.e. Rs 14,574. In Q2 2021, the average premium for all the age groups from 26 to 56 is Rs. 25,194.
Family floater health insurance plans are cheaper
The family members covered under the policy directly influence the premium prices of insurance companies. Adding an adult member does not increase the price proportionately. For example, an individual pays Rs. 16,327 when one adult is covered and in case of two adults and two children, Rs. 31,098 is to be paid, highlighting that the family floater plans are more economical than buying 2 separate policies.
Term life insurance
The unrelenting impact of COVID19 in India has impacted the Term Insurance category with an exceptional shoot-up in the mortality rate.
“The constantly increasing Term Insurance Price Index has once again reflected a change in the index price of a 2.79 surge, taking the average price of term insurance premium to Rs. 22,524 in Q2 2021,” the report added.
Age, being a paramount factor affecting the term insurance premium, lays a big impact on the premium prices, hence, in the current scenario, delaying a term plan by 10 years will cost 46.2 per cent higher for 25 years old and 72.7 per cent higher for a 35 years old person.
“The overall insurance sector is experiencing an escalation in recent times. The unprecedented scenario has laid doubly pressure on the insurance sector which the industry tried hard to manage in the last few months. However, the partial pressure has to be borne by the customers as well”, said Naval Goel, Founder & CEO, PolicyX.com
“Despite the price rise, customers can make the best out of their plans by making the purchase of the suitable policies at the right age. If we refer to these latest findings, then the biggest hike is spotted at the higher age and the delay in the purchase of a policy certainly reflects an impact on the premium prices. Not to forget, the added premium prices of insurance plans now give added benefits and more security, hence the customer always has an edge in buying the insurance policies”, adds Goel.
Segregating the impact into different categories, males, in the age bracket of 55-years, tops the chart in the list of premium increases by 3.3 per cent i.e. the highest jump among all age groups. Conversely, the average premium for the female age group of 25-years increased to Rs. 9,307 in Q2 2021, accounting for the lowest hike at 1.4 per cent.
Smokers pay more for life insurance
Along with age and gender, the price of a term plan is also affected by smoking habits. On an average, male smokers pay 59.92per cent more than their non-smoking counterparts, while female smokers pay 57.91per cent more. The highest impact has been observed in the 55-year age bracket. Males represented a 67.32per cent increase and females accounted for a 66.21per cent increase in regular premium prices for being smokers.
The least affected group was 25-years old females who observed a hike of 44.16per cent in their respective premium prices for being smokers. Further, on an average, while a smoker male had to pay Rs. 29,430 as annual premium for term insurance in Q1 2021, the amount has now increased by nearly 3.26per cent to Rs. 30,390