Mortality charge hiked in new ULIPs despite increase in life expectancy

Longevity should reduce mortality charges. Instead, many insurance companies have resorted to increasing it. It could be just another way to deceive customers and fill their coffers through the additional charges

The average life expectancy in India for males has increased from less than 60 years in the 1990s to over 67 years today, mainly due to medical advance. One would have expected that this would result in lower mortality charges in life insurance calculations. However, the reverse seems to be the reality.

Mortality charges of new ULIPs have gone up. Indian insurance companies use LIC's mortality table (which was prepared 15 years ago) as a base and combine that with their own claims experience and expenses to price products. This is a subjective matter and hence the mortality charges of insurers vary, but there is no downward trend.

The cover story in a recent edition of Moneylife magazine exposed how insurance companies have not really reduced premium allocation and the policy administration charge. The new ULIPs carry more charges than old ULIPs over a period of five years or more.

Interestingly, many insurers have also increased the mortality charges, probably because it is outside the cost cap of the Insurance Regulatory and Development Authority (IRDA). Insurers are becoming creative in finding ways to levy charges on customers. In some cases, the payment for accidental death benefit is more in new ULIPs and hence the mortality charge has been increased substantially.

The Bajaj Allianz Max Advantage brochure specifies that in case of death the company will pay the sum assured and the fund value to the nominee. Apart from this, an additional sum assured shall be payable if the cause of death is an accident, subject to the policy being in force. These additional benefits that were not provided by Bajaj Allianz iGain II (Old) has jacked up the mortality charge substantially. (The tables indicate the mortality charge per Rs1,000 sum assured for a male life in the old and new ULIPs.)

The Reliance Classic plan brochure specifies that an additional amount equivalent to the base sum assured is payable in the case of accidental deaths. The additional benefit has jacked up the mortality charge substantially.

Birla Sun Life Dream Endowment plan (new) does not give an additional benefit, but it has increased the mortality charge for the younger age groups and reduced it for older age groups following on a study of mortality experience.

Moneylife tried to contact Bajaj Allianz, Birla Sun Life and Reliance Life on the justification for the increased charges, but did not get any response from these companies.

Aviva and Metlife have also hiked mortality charges by about 10% and 20% respectively. 




6 years ago

If you look at the charges objectively i dont really see any prima facie, birla plan has additional benefits that earlier plan hence increase in charges. Sounds ok as why would any company give addl benefit for free. @shankar & @satish - ULIPS are very transparent products in comparision to non ulips if you check closely, point it people just agree with their agent and go for it without any due deligience. @Satish - what is the rationale for 10 years? i dont think anyone is able to predict returns accurately anyways.



In Reply to Zack 6 years ago

Dear Sir, I do agree that non ulip plan has very much to hide. People don't see IRR return or net yield. They are just make savings. Do not investing. You are also true that there is no rationale for lock in period of 10 years, but we all know that in new ulips some charges reduced & added in other heads. So, in future mis-selling will continue. My intention behind lock in of 10 years, is mis-selling will reduce some extent. We can't stop life insurance co. to sell ulip or govt. can't. In ulip, we can't compare NAV return with benchmark index return, because there is charges are deducted in terms of unit. Inspite of Ulip get more score against traditional, but people are investing in ulip much more heavily due to ignorance. They don't know, this money will invested in market. Specially in LIC, mostly agents sell it just like fixed return schemes. You can predict return much more nearly in MF comparing to ULIP. That's it.

Gerard Colaco

6 years ago

The American commedian Evan Esar said: "Insurance is the business of protecting you against all possible risks, except the risk of the insurance agent." What he forgot to include was the risk of the insurance company too!

Madhusudan Thakkar

6 years ago

Moneylife Team deserves compliments for exposing open secret of life insurance companies.On the one hand term plans are becoming less expensive day by day mortality charges are hiked for no reason.Mortality charges play an very important role in overall returns.All companies have hiked their mortality charges in new ULIPs,In some companies there are different mortality charges for different ULIP plans.


6 years ago

IRDA not protecting policy holder but insurance companies. All this plan approval done blindly. Why should they are not extending lock in period min. of 10 years. Charges under various head are for looting, nothing else.


6 years ago

Looto Indian ko looto....Sara Hindustan me scam ho raha hai.Niche se lekar upar tak sab chor baitha hua hai....Aam Addmi to bali ka Bakra hai....Gandhiji ne kya yehi Hindustan ka sapna dekha tha......

NPS modification in store for urea sector, not NBS

New Delhi: Decontrolling the urea sector by bringing it under the purview of the Nutrient Based Subsidy (NBS) policy may be a far cry as the government is more inclined to go on with the New Pricing Scheme (NPS) for the often-used fertiliser, reports PTI.
“The thought process of the Department of the Fertiliser appears to be inclined towards a modified NPS-III,” Indian Farmers Fertiliser Cooperative’s (IFFCO) joint managing director Rakesh Kapur said at a conference organised by Fertiliser Association of India.

The fertiliser ministry opined that decontrolling the urea sector by bringing it under the purview of the NBS would not be fair and would not augur well for all firms in the heterogeneous urea industry since the production cost varies from one unit to the other depending upon the plant vintage, feedstock and the level of energy consumption, Mr Kapur said.

The government has already freed potassic and phosphoric fertilisers with the introduction of NBS scheme with effect from April this year. However, it kept under control the price and movement of urea, which constitutes nearly half of India's total fertiliser consumption.

The government had introduced the NPS-III scheme aimed at greater efficiency in urea production and its distribution in the country. The scheme was effective from 1 October 2006 to 31 March 2010. It was later extended on an ad-hoc basis.

Under the modified NPS scheme, the government is likely to fix a price band for urea and allow the domestic industry and importers to sell the fertiliser within the band, which may be anything between 2%-5% more than the current price of Rs5,310 per tonne, official sources had earlier told PTI.

While the industry is in favour of total decontrol of the urea sector, including bringing imports of the fertiliser under Open General Licence (OGL) scheme; continuation of the NPS scheme could be only favoured with some modifications which include a special incentive for per tonne production to the urea units of over 20 years of age.


Unseasonal rain causes havoc for grape farmers

About 30-40% of the grape crop is estimated to have been damaged in grape-growing areas of Maharashtra, compounding the wine industry’s problems

Unseasonal rain showers have damaged crops in many parts of Western India. Much of this loss has been in Maharashtra where onions, soybeans and grapes have suffered seriously. Grape growing areas such as Nashik, Sangli and Baramati have been particularly affected with up to 30-40% of the crop destroyed, according to industry experts.

 "This year too, the post-monsoon, unseasonal rain has caused havoc in the grape-growing regions of Maharashtra. A large part of the crop has been destroyed and the Downey mildew if not controlled will affect the quality of whatever remains," said Subash Arora of the Indian Wine Academy.

Mr Arora feels that growers have little hope of getting better prices for what remains of the crop, to be able to make up for the losses. The prices could be as much as 30-40% from last year, he said.

Rajesh Jadhav, secretary, All India Wine Producers' Association, said that the wine industry has been through a liquidity crunch in the past two years and the unseasonal rain will add to the problem. "About 30-40% of the grape crop has been destroyed. Already, most of the wineries have unsold stock of wine due to lack of demand. Grape farmers are faced with poor demand and now the rain has caused further losses," Mr Jadhav said.

The grape crushing season begins around February every year and the prices of grape wine are also determined at the same time. With only a few wineries buying the grapes, grape farmers will have to settle for lower prices.

"Around 65 of the existing 70 wineries in Maharashtra are owned by small farmers who also grow grapes. Since all of them are already stocked with unused wine, there is very little demand. The other wineries are owned by corporate and have their own grape farms. Even if they buy from small farmers it is on an agreement basis, which doesn't get the farmers much revenue," Mr Jadhav explained.

It is a little early to determine the supply and price of wines in the market. Some information should be available when the crushing season begins.


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