LIC of India: Plans to Reduce Term Plan Premium Rates

India’s largest insurer, LIC of India (Life Insurance Corporation of India), plans to reduce its term insurance policy premium rates. Term insurance policies refer to those covers where the insurance company makes a payout only upon the death of the insured.

Awareness Increase..!

Mr. D K Mehrotra, LIC chairman said, “We are in the process of reviewing our rates and will do so after this financial year. Although LIC’s rates for term insurance are higher than that of private insurers, the corporation has a much better track record in claim settlement. There is a big increase in the awareness for life insurance protection. Apart from competition, the awareness has been generated because middle class buyers with loans want to ensure that their liabilities are taken care of.""

Now, a 30 year old man  who purchases a 25 year LIC of India term insurance plan cover pays Rs. 14,600 annually for a cover of  Rs. 50 lakh. This is much higher than the premium charged by private life insurance companies which are in some cases up to 35 to 40% cheaper.

Cheaper Cover Online..!

Many companies offer much cheaper cover online. However, LIC of India officials says, ''LIC has a better track record in claim settlements. Term insurance rates can not be compared directly because in high value policies the actual premium would depend on medical underwriting and the parameters for “normal” rates vary across insurers."
The rates for term insurance are revised periodically after reviewing changes in life expectancy of the insured population. As life expectancy has been rising because of medical advances, the cost of cover has been constantly declining and are in some cases a 4th of what they were at the time of opening up of the life industry in 2000. While rates are expected to keep declining until life expectancy rises to 85 the highest level of life expectancy prospective buyers can not wait. This is because prices rise with the age of entry.

According to the IRDA’s annual report, the claim settlement ratio of  LIC of India was better than that of  the private life insurers. Settlement ratio of LIC of India increased to 97.03% in 2010-11 as compared to 89.04 %  for private life insurers.

Similarly, LIC of India  had a low rejection rate of 1% as compared to 8.90% for private insurers.
In absolute terms, private life companies rejected 9,966 claims, while LIC had rejected 7,384claims despite having a much larger share of business than private insurers.

One the the LIC of India  said, "The claims are typically rejected if any material fact which would have impacted the insurer’s decision on pricing would have been with held or mis-represented. In the case of LIC of India such claims are settled on an ex-gratia basis if the misrepresentation is not related to the cause of death.
Src : ET

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