An individual who is a non-smoker aged 30 years can purchase Aviva i-Life term plan online with a cover of Rs. 50 lakh for Rs. 4635 whereas the similar term plan of Reliance Life Insurance (Reliance e Term) is available at Rs. 5843. In contrast, LIC offers term plan with the same basic cover amounting to Rs. 50 lakh at a much higher premium of Rs. 16,800.
Such huge difference in premium in case of plain term insurance plan with only death benefit by different insurers both private and public-run players is mainly attributed to mortality rate charges that are charged at different rates by different industry players. Mortality rate charges levied by insurance company is charged for the insurance cover upon death. The charge also covers some other expenses. So, in all its the actual cost of insurance.
Three factors are mainly accounted by the insurance company to determine the mortality charges that include the age of the policyholder, risk profile of the insured and the total policy amount at stake as per the policy terms.
So, based on the mortality rate table that estimates life-expectancy of the population, premium for insurance plans is computed for different set of investors by insurers. And, as life-expectancy has increased in recent times, that eventually means lower premium rates for insurance plan.
And as LIC makes use of mortality table of 1994-1996 when the life-expectancy was estimated to be comparatively lower, it charges a higher premium in comparison to other private players who refer to a more recent mortality table for determining insurance premium rates.
Other factors responsible for the wide difference in premium rates for similar online term insurance plan are high-scale competition in the industry that prompts several new players to offer such plans at cheaper rates and subjective judgment of the actuary of the concerned applying for the insurance policy.