Mortality, illness data update to bring down insurance costs

Mortality, illness data update to bring down insurance costs

Chennai: Indian life and medical insurance firms may soon be able to price their policies better because of availability of data on death rates and illnesses among Indians.

At least one executive in the insurance business thinks this could reduce the premia on policies.

The Life Insurance Council, a body of Indian life insurance companies, will sign an agreement next week with the Institute of Actuaries of India (IAI) to set up a Mortality and Morbidity Research Institute (MMRI).

This institute will generate two sets of data: a morbidity table that indicates the frequency of illness and disease in a population, and a mortality table, which will measure the number of deaths per 1,000 people in a year. The council hopes to compile the data within a year of MMRI becoming operational.

MMRI will function as an arm of IAI and will be funded by insurance companies. The funding model has not yet been decided.

Insurance companies need such data to fix the rates on policies. Currently, insurance companies such as Life Insurance Corp. Ltd (LIC) and Tata AIG Life Insurance Co. Ltd use data of countries such as the UK to price and customize health insurance products for their customers in India.

As for mortality data, life insurers currently rely on dated information from LIC’s 1994-96 mortality tables. Policies, in this case, are priced on the basis of this and the experience of insurers.

Insurance policies are priced by actuaries, people trained to look at underlying data (such as morbidity and mortality) and assess risks.

The introduction of the new tables may result in different premium rates for various categories of people and could also usher in a new set of innovative life insurance products, says G.N. Agarwal, president of IAI, the apex body that governs actuaries in the country.

Agarwal’s view on innovative products is echoed by R. Kannan, member actuary at insurance sector regulator Irda. “India does not have a policy that provides cover for loss of salary due to some sickness, but with our own morbidity table, we could expect life insurers to come up with such innovative policies over a period of time," he says.

Not everyone is sure the data will translate into innovative products.

“The tables will dictate only the pricing of insurance policies, nothing more and nothing less. Product innovations are happening and will continue to do so," says Joydeep K. Roy, chief distribution officer of private sector Tata AIG Life Insurance Co. Ltd.

The data that the new institute will come up with, however, is expected to better represent changes that have happened in India.

“With an improvement in health-care facilities in India, it is believed that there have been significant improvement in mortality rates. This might result in reduction of mortality charges resulting in cheaper life insurance policies for customers," says Debashis Sarkar, director (additional distribution and marketing), Max New York Life Insurance Co. Ltd.

The institute was initially supposed to be set up around two years ago.

“There was a delay in this regard because, initially, there were plans to set up a company to bring out both the tables, but we ruled that out," says IAI’s Agarwal.