Besides the solvency margin, other factors such as mortality risk, commission, and operational expenses are taken into account by life insurers for deciding rates. For deciding the premium on an individual policy, factors such as age, health of the individual, lifestyle and the policy tenure are taken into account.

Insurers are currently required to maintain a solvency margin of 150 per cent. Solvency margin requirements are prudential norms governing the capital requirement of insurance companies. They are equivalent to capital adequacy ratio (CAR) prevalent in the banking industry. A reduction on margins eases the capital requirement for both individual and group term policies by a third.

“We have revised the rates for New Risk Care-II, which we are about to launch. The reduction varies from 10 to 20 per cent. For a 30-year male, a 15-year policy with a Rs 10-lakh cover will now cost a premium of Rs 2,680 as compared with Rs 3,280 earlier,” said a Bajaj Allianz Life executive.

Kotak Life Insurance has relaunched Kotak Term and Kotak Preferred Term with reduced rates. Kotak Mahindra Life Insurance MD Gaurang Shah, said, “We have reduced our term plan rates up to 40 per cent. With these reduced rates, for a 30-year old healthy male, with a cover of Rs 10 lakh for a term of 10 years, the Kotak Term Plan will cost Rs 2,184, excluding service tax.”