Munich Re tightens term insurance underwriting

Mumbai: Buying high value term insurance will require proposers to not just provide proof of income but also salary statements. Reinsurance giant Munich Re has come out with new terms for supporting the reinsurance programs of life insurance companies.

According to industry sources, Munich Re has also proposed to hike its rates by as much as 50%. Reinsurance rates are one of the inputs for determining the insurance rates on term policies. The increase would not get fully reflected in term insurance premium as only a portion of the risk is reinsured. Besides reinsurance rates, Indian insurers price policies based on the industry’s experience in respect of mortality.

In its September 18 edition, TOI had reported that the German reinsurer had asked companies to tighten the process ahead of a review of its contract in October. The company has now officially communicated its intent to hike rates and specified the new process for underwriting.

“Insurers have been pricing their term policies on the back of reinsurance support. Even with the increase in rates, the premiums are lower than what the rates would have been if they were based on mortality rates for the general insured population. Companies have been pricing high-value policies aggressively with the expectation that the experience in this category would be better than the general segment,” said Abhay Tewari, MD & CEO, Star Union Dai-ichi Life Insurance.