The country’s largest insurer, Life Insurance Corporation of India, plans to reduce its term insurance rates. Term insurance policies refer to those covers where the insurance company makes a pay out only upon the death of the insured.
Although LIC’s rates for term insurance are higher than that of private insurers, the corporation has a much better track record in claim settlement.
According to the IRDA’s annual report, the claim settlement ratio of LIC was better than that of the private life insurers. Settlement ratio of LIC increased to 97.03% in 2010-11 as comparedto 89.04% for private life insurers.
Similarly, LIC had a low rejection rate of 1% as compared to 8.90% for private insurers.
At present, a 30-year-old who purchases a 25-year LIC term cover pays Rs 14,600 annually for a cover of Rs 50 lakh. This is much higher than the premium charged by private life insurance companies which are in some cases up to 40% cheaper. Term insurance rates cannot be compared directly because in high value policies the actual premium would depend on medical underwriting and the parameters for "normal" rates vary across insurers.