Irdai in October had mandated all life insurers to launch Saral Jeevan Bima plans from 1 January 2021
Experts say Saral Jeevan Bima may work as an entry-level term plan
Edelweiss Tokio Life Insurance Co. Ltd has launched India’s first standard term insurance plan called Saral Jeevan Bima, which is aimed at first-time buyers and those who may not have easy access to existing term plans.
The Insurance Regulatory and Development Authority of India (Irdai) in October had mandated all life insurers to launch Saral Jeevan Bima plans from 1 January 2021.
We look at what this new plan offers, who should buy it and whether the costlier pricing will defeat the product’s purpose of deepening insurance penetration.
Edelweiss Tokio’s Saral Jeevan Bima plan offers a sum assured of ₹5 lakh-25 lakh. Individuals can choose the premium paying term starting from five to 40 years.
A sum assured of ₹25 lakh with a policy term of 30 years for a 30-year-old non-smoking male individual will come at a premium of ₹727 per month, including taxes. However, compared with this, the company’s existing term insurance plan called Zindagi+ costs around ₹390 per month for similar terms.
“The pricing of a product is a reflection of the expected mortality experience of its target market. As it is a newer customer category, product pricing and underwriting will evolve over time with availability of more data," the company’s spokesperson said.
Edelweiss expects the product to be bought by segments where the mortality experience is likely to be higher.
Explaining the reason behind higher pricing, Mahavir Chopra, founder, Beshak.org, a research platform for insurance users, said: “Insurers use demography, income category, place of residence, occupation and education level of the buyers to create term products. The problem with Saral Jeevan Bima is that there are no filters allowed, so the premium will be high as the risk is high."
Experts say Saral Jeevan Bima may work as an entry-level term plan. The current term plans usually offer a minimum sum assured of ₹25 lakh and a term of at least 10 years.
“Today, sum assured of ₹5 lakh isn’t available in the market. Some parts of the costs for distribution, policy issuance and medical underwriting are fixed. So, enabling a ₹5 lakh product will be more expensive proportionately than a ₹25 lakh plan. But from the ₹5 lakh sum assured point of view, these plans may not be expensive as there is no alternative available," said Abhishek Bondia, managing director and principal officer, SecureNow.in, an insurance broker.
Edelweiss Tokio’s Saral Jeevan Bima plan will cost ₹145 per month for a sum assured of ₹5 lakh and a policy term of five years.
“With this, people who earlier did not have access to term insurance will be able to easily compare and get financial security," said Chopra.
However, an individual with good educational qualification and job would find regular term insurance plans cheaper than Saral Jeevan Bima.