IRDA’s new mortality table reveals improvement in life expectancy

Life insurance premiums may come down as the number of deaths per person (mortality rate) has reduced, according to the new mortality table released by the Insurance Regulatory and Development Authority (IRDA).

According to actuaries, there has been an overall improvement of around 10 per cent in life expectancy across age groups. The longevity per person has increased from 70 to 75 years.

“Premiums for consumers in the higher age brackets where there has been significant improvement in mortality may go down in term plans and insurers may be able to offer higher bonuses for savings plans,” said Sanchit Maini, Appointed Actuary, Max Life Insurance.

Mortality charge, a part of the premium paid by a policyholder, is the actual cost of insuring the person against death.

Specify, justify

IRDA said the appointed actuaries making use of the mortality table should specify modifications/adjustments made for the purpose of pricing of product with proper justification.

“Companies will have to factor in these new tables in their current pricing framework and re-price products in future,” said Puneet Nanda, Executive Director, ICICI Prudential Life Insurance.

“We have been witnessing a faster improvement in mortality rates in India by around 1 per cent every year as compared to other developed markets,” said Maini.

On the impact of higher life expectancy and reduction in mortality charge, Aneesh Khanna, Head, Marketing and Product Management, said: “We may see a reduction in premium rates in certain segments like term plans.”

Already ‘priced in’

However, insurers feel that the mortality charges reflected in the table have already been factored in by most insurers. “Mortality improvements have been priced in by insurers especially in term plans where premium rates have been declining,” said Sunil Sharma, Chief Actuary at Kotak Life.

“Some insurers may ignite a price war but most insurers have already factored it (improvement in life expectancy) in. So I don’t think there will be significant change as such,” said Srinivasan Parthasarthy, Chief Actuary, HDFC Life.

(This article was published on February 27, 2013)
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