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The increase in term life insurance premiums may be delayed by 10-15 days as re-insurer contracts await renewal and new product for a few insurers are yet to be approved, according to insurance brokers.

These premiums were earlier set to be increased from 1 April, but it has been deferred now and is now likely to be hiked later this month, as per industry source. These are premiums that life insurers pay to reinsurers for re-insuring their risk. According to the previous reports, premiums for term insurance were expected to rise by up to 20% in 2021 as insurers take into consideration the emerging mortality rates.

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An industry source said, "Term insurance policies normally are pure risk cover which is payable only in case of the death of the life assured. Currently, in India, the term insurance policies are extremely economically priced given that the key influencing factor is the expected mortality risk on the portfolio or in simple words, the incidence of loss due to death."

Moreover, one should know that term insurance premium rates are determined by the insurance company based on the probability of death (mortality rate) at various ages among its customers. In western countries, this is done by insurance company's basis actual data whereas in India this is done basis the assumption of death rates.

So, this way, an insurance company normally works on a concept of creating a pool of fund through premiums, which is being paid by their policyholders. From this pool of funds, they settle the insurance claims of affected policyholders who die every year. This way, the concept of life insurance involves the group sharing of individual losses. And a large part of this pool is reinsured by the insurance companies. Hence, the renewal or renegotiating of re-insurer contracts impact the premiums.

Thus, looking at the current covid scenario, an adverse mortality experience over the past few years has intensified which has now led reinsurers to increase their rates resulting in an upward revision of term insurance premiums.

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