On the instructions of the Insurance Regulatory and Development Authority, IRDA, the insurance companies have started offering the standard simple life insurance policy. However, for those who were expecting lakhs in the new policy, they would get a chance to buy insurance on their cheap premiums, they might get a big shock. If you look at the premiums of a simple life insurance policy offered by PNB Mate Life, Edelweiss Tokyo and Exide Life Insurance, it would be clear that their premiums are not cheap. They are also more expensive than the policy of a common term plan. This is believed to be a major setback for the entire Irda exercise.
A simple life insurance policy offered by PNB Met Life requires a person of 35 years to pay a premium of Rs 7,859 to get a cover of Rs 25 lakh. At the same time, the company will have to pay Rs 7,346 for the already available term plan. Similarly, for a person of 40, 45 and 50 years, comparison between the two plans, the burden of premium is more in the simple life policy. Comparing the policy of Edelweiss Tokiya and Exide Life, not just PNB Met Life, it is clear that the cost of premium is higher in Saral Insurance policy.
Better product for the self-employed
Santosh Aggarwal, Chief Business Officer (Life Insurance), PolicyBazaar.com stated that earlier, self-employed people with annual income of 3-5 lakhs were not able to get insurance due to non-availability of income proof. Now it will be easier to provide term insurance policy for this category with simple life insurance. We expect the term insurance policy issuance rate to this class to go up to 70% which till now was only 30%. However, it will be a little early to assess some trends.
So premium cost more
Insurance experts say that no filter has been allowed in the new product from IRDA. Insurance companies use buyers’ demographics, income ranges, place of residence, occupation and level of education to determine the premium of a product. However, no filters are allowed in simple life insurance. Hence the premium of this product is expensive. At the same time, another expert said that the premium rate of the insurance product has been determined on the basis of the targeted mortality rate. However, this new product and companies do not yet have data. Hence premium is expensive. The premium will be decided on the basis of data received in the coming time. It is possible to change it further.
Will serve as initial term plan
Insurance experts say that Saral Jiban insurance plan will serve as the initial term plan. At present, the minimum cover in term plans is Rs 25 lakh and the term duration is at least 10 years. Currently no insurance plan offering 5 lakh cover is available in the market. For this reason, it is more expensive for insurance companies to become 5 lakh cover plans than 25 lakh covers.
Suitable for first time insurers
Insurance experts say that it will be very easy for people who have not yet taken insurance and are going to buy insurance for the first time. However, a person with good educational qualifications and a job will get regular term insurance plans cheaper than basic life insurance.
