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There is a quiet rate war raging among insurers that has brought down the cost of Rs 1 crore cover to Rs 15,000 from over Rs 50,000 per annum a decade ago. A big chunk of the reduction has happened in recent months. Without much publicity life insurance companies have drastically reduced premium rates on high-value term insurance policies of Rs 1cr and above.

As against a premium of over Rs 50,000 for a Rs 1 cr cover for a 30-year old woman charged by Life Insurance Corporation a decade ago, private life insurer Birla Sun Life are offering a similar cover for an annual premium of around Rs 15,000.

Other private life insurers, such as ICICI Prudential life and HDFC Standard Life, have also reduced their term insurance rates. The term rates for LIC policies, too, have come down drastically as compared to 10 years ago.

Today, one can avail of a LIC term policy with a sum assured of Rs 1cr for an annual premium of nearly Rs 25,700-32 ,000. But unlike LIC whose rates are available to most buyers, Birla Sun Life has stringent underwriting norms and the rates are available to only those in the best of health.

Term insurance is a cover where the only benefit is a payment if the insured dies during the term of the policy is the most basic form of life insurance. The cover is now almost a commodity with web-based aggregators offering quotes from all insurance for term protection.

ICICI Prudential Life appointed actuary Avijit Chatterjee said the decline can be attributed to better mortality experience in the recent past.

This is another factor, industry-watchers feel, that has worked in favour of the rich. Since such policyholders have access to quality healthcare and lead a relatively superior lifestyle, their life expectancy is high, and this translates into lower rates.

“Term insurance premium rates have started seeing a downward trend since the last three years. Over the last couple of years, they have dropped by nearly 30%," said Rahul Aggarwal, CEO, Optima Insurance Brokers. One of the reasons for this, he explained, is the increasing demand, mainly from the high net worth segment, which has inflated the volumes. "Increasing volumes are driving the rates down and lower rates, in turn, are stimulating the demand for term insurance," he added

"Over the last six months, some insurers have reduced the term insurance rates. The price reduction is limited mainly to high value policies targeted at the HNI segment, that is, people earning over Rs 1 lakh per month, who seek policies entailing a sum assured of more than Rs 25 lakh," said a senior executive with a private life insurance company.

HDFC Standard Life Insurance, for instance, has reduced the premium rates of its term plan by around 25% across different premium and age bands.
source: The Economic Times

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