Calcutta, Feb. 14: The Life Insurance Corporation of India has increased the premium rates across all age groups under its Jeevan Varsha plan, a traditional money-back scheme with guaranteed additions. Jeevan Varsha will be launched on Monday and will be open for subscription till the end of next month.

The hike in premium rates comes at a time when the Insurance Regulatory and Development Authority (IRDA) has urged life insurers to make their policies more affordable.

The IRDA has reduced the solvency margin — the percentage of capital life insurers need to set aside for underwriting each insurance plan — for both traditional and unit-linked schemes so that companies could save on their cost of capital and “provide insurance products at affordable premium rates”.

“The reduction in solvency margin will result in a saving of Rs 30 crore capital for us,” said an official of Max New York Life Insurance Company, which has a market share of around 3 per cent at the end of November 2008.

LIC officials at the company’s eastern zonal office, however, could not even give any approximate figure of savings in capital that has accrued to the corporation following the reduction in solvency requirement.

The public sector insurer with a 50 per cent market share has benefitted the most from the IRDA’s move.

According to R. R. Dash, zonal manager (eastern zone), LIC, the premium rates are high in the Jeevan Varsha plan because it guarantees additions at the rate of Rs 65 per Rs 1,000 sum assured for each policy year for a 9-year term and Rs 70 per Rs 1,000 sum assured for a 12-year policy.

“If a policyholder dies within the policy term, his/her nominee will get back the sum assured plus the guaranteed additions that has accrued to his/her account at the time of death,” he added.

“In other types of policies, such as endowment, a policyholder gets the survival benefits on maturity. But in Jeevan Varsha, specified percentages of the sum assured is paid back to the policyholder at regular intervals while the guaranteed additions will continue to accrue on the basis of the original sum assured,” Dash said.

LIC offered guaranteed additions at the rate of Rs 90 per Rs 1,000 sum assured and Rs 100 per Rs 1,000 sum assured for its single-premium plan Jeevan Aastha that closed last month.

“The rate of guaranteed additions in Jeevan Varsha is lower at 6.5-7 per cent because it is a regular money-back plan. The general rate of interest and investment return have also come down,” Dash said.