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It's that time of the year when showrooms put up huge banners screaming "Discount" and "Sale" as they try to get rid of merchandise that may not find buyers till next year. But right now, something far more precious than off-season apparel and household appliances is being sold at unbelievably low prices. Term plans, which are seldom pushed by agents but are arguably the best form of insurance, are being sold at premiums 40-50% lower than what they were about 1-2 years ago.

"The term insurance plan I bought five years ago for Rs 11,500 covers me for Rs 20 lakh for 25 years. Now I am 45 but the same premium can buy me a cover of Rs 35 lakh for 20 years," says Delhi-based businessman Sanjeev Agarwal. Much of this has to do with the growing competition in the insurance market. More than 20 private insurance companies have set up shop in India after the insurance industry was reopened to the private sector 10 years ago. Some of the newer players, desperate to get a toehold in an overcrowded market, are offering lower premium rates to attract customers. They are encouraged, in part, by the improving life expectancy figures in the country. Advances in medical science and improvement in health care facilities have pushed up life expectancy in India. The average Indian now lives up to almost 65 years, compared to about 55 years in the 1980s and 58 years in the 1990s.

Many life insurance companies have taken this reality into account and rejigged their mortality tables to align with the lower risk of death. Old products have been discontinued or the premium has been revised accordingly. "Earlier all insurers followed the old LIC mortality tables. But all insurers are not relying on the LIC tables. So, pure protection products now being launched are cheaper," says Manik Nangia, Corporate Vice-President, Product Management, Max New York Life Insurance. The Platinum Protect plan from Max New York Life is about 40% cheaper than the earlier term offering which has now been phased out. "The premium on our term insurance product has come down by around 40% since it was introduced," adds Andrew Cartwright, Chief Actuary, Kotak Mahindra Old Mutual Life Insurance.

However, some insurance companies have stoutly stayed away from this mega sale. There's no change in the premium rates of the state-owned Life Insurance Corporation or those of Reliance Life Insurance. "There's a difference of up to 50% in the highest and lowest premium quote of term plans across various insurers," points out Rahul Aggarwal, CEO, Optima Insurance Brokers. An LIC spokesperson defends his company's policy, saying that "more than talking about the premium and how cheap it is you need to take into account the chances of your family getting the claim amount if something happens to you". Indeed, LIC has a claim rejection ratio of 1% compared to 20-25% of some private players.

ONLINE ADVANTAGE

There are more goodies in store. Online term plans, where a customer buys the policy directly from the company, are up to 35% cheaper than their offline versions (see table). By removing the intermediary between the customer and the company, the world wide web has helped bring down the price of the cover. Says Madhivanan B., Executive Director, ICICI Prudential Life Insurance: "The online channel lowers the costs of processing and servicing, which we pass on to customers."

The other reason for this discounted rate is that the online buyer figures low in the risk matrix. He is young, well-educated, reasonably well-off and an urbanite. He may not be the cream of Indian society, but he's certainly the thick upper crust. Online term plans, some of which are available only in select cities, also have a higher maximum age. You can take a term cover up to the age of 75 years compared to 60-65 years earlier. Insurance companies realise that the better access to healthcare in urban areas means that city dwellers have a longer life span than the average Indian.

Source: http://economictimes.indiatimes.com/etwealth.cms