Underwriting guidelines need overhaul to benefit life insurers

Life firms' underwriting guidelines need to be reformed due to the country's rapidly growing life expectancy, according to a study.
The paper presented at a seminar in the city last week said such reforms will help life insurers derive benefits from the expanding silver economy.
Silver economy is the system of production, distribution and consumption of goods and services aimed at using the purchasing potential of older and ageing people and satisfying their consumption, living and health needs.
Currently, underwriting guidelines prohibit the people over the age of 50 from availing of life insurance products.
On the other hand, there are around 10 million ageing people who remain outside the life insurance coverage, according to the paper.
Jamal Mohammed Abu Naser, Chief Executive Officer (CEO) at National Life Insurance Company, a privately-owned life insurer in Bangladesh, presented the paper styled "Impact of Ageing on Life Insurance Operations."
Mr Naser said the life expectancy has been growing fast in Bangladesh and other countries in South Asia.
Quoting the World Bank statistics, he said life expectancy in Bangladesh was 59.47 years in 1990 and it increased to 65.32 years in 2000 and 70.20 years in 2010. It stood at 72.49 years in 2018.
"With the improvement in the longevity of people, there is need for a shift in underwriting rules. The alternatives are increase in perineum, decrease in death claim, change in class and period of assurance."
He also suggested protection against longevity risk as such policy could meet their needs at older ages.
Calling on the government, regulators and stakeholders to help prepare such policy for older people, Mr Naser said insurers take savings from the people, promising in return to deliver a retirement income that can last for life.
Some discussants at the seminar argued that rising longevity is good news for insurers as they (insurers) can sell protection against premature death much more cheaply than they once did.
Citing some challenges including lack of mortality and morbidity tables, top executives and experts said they have been using very old mortality tables while preparing life products.
A mortality table shows the rate of deaths occurring in a defined population during a selected time interval or survival from birth to any given age.
Statistics included in a mortality table show the probability of a person's death before their next birthday, based on their age. Mortality tables are also known as a "life tables," "actuarial tables" or "morbidity tables".
However, the Life Insurance Corporation of India passed on the benefits of a new mortality table to its policyholders belonging to the higher ages.
The new table incorporates the improved average life expectancy of Indians - which has moved from 60 years in 1996 to 65 years in 2011.
This has resulted in the premium being a little lower (about 10 per cent, according to the risk pricing for mortality).
While talking about the ageing population and mortality tables, Dr Sohrab Uddin, an actuary in Bangladesh, said Bangladesh has been preparing life products on 70 years old mortality table.
The old mortality tables assumed much low life expectancy.
He said a World Bank project is now working on how to build a new mortality table for new products.
There is a law to prepare such table in every five years and later it revised making to do the same in every 10 years but all efforts were futile, he added.

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