Private Sector Life insurance Companies Increase Term Insurance Premiums by 4-7% in Response to Market Conditions

In a move that is set to impact policyholders, major private sector Life insurance companies such as HDFC Life, ICICI Prudential, Bajaj Allianz, and Max Life insurance have increased their term insurance premiums by 4-7 per cent. This decision comes in response to various factors including moderation in bond yields, inflation concerns, and adjustments in reinsurance rates, according to industry sources familiar with the matter.

The rise in term insurance rates has been observed across the board, with prominent players like Bajaj Allianz Life, ICICI Prudential Life, Max Life, and HDFC Life making adjustments to their premium rates recently. This move is expected to be followed by many other insurers in the industry.

Vaibhav Kumar, head of product management and ecommerce channel at Max Life insurance, highlighted the sensitivity of term insurance premium rates to long-duration interest rates. He mentioned that nearly half of their customers opt for policy terms exceeding 40 years, making the rates susceptible to fluctuations in interest rates. Despite the changes in rates, Kumar reassured that the company’s experience on mortality remains stable and in line with their assumptions.

The drop in bond yields over the past year has played a significant role in the decision to increase term insurance premiums. Yields on longer-tenure bonds maturing in 2063 and 2051 have decreased by 31 bps and 32 bps respectively. Insurance companies, being major buyers of longer-tenure bonds, have been impacted by these changes.

Furthermore, the benchmark 10-year government bond yields have softened following the announcement by JP Morgan regarding the inclusion of Indian government securities issued by the RBI in its GBI-EM index. This has led to a 19 bps drop in the yield on 10-year bonds since September last year.

While HDFC Life, ICICI Prudential Life insurance, and Bajaj Life insurance did not respond to emails seeking comments on the matter, Kuldip Bonyal, secretary general of the Life insurance Agents Federation of India, confirmed that most private life insurers have raised their term insurance rates by 5-7 per cent. However, SBI Life insurance and LIC have not implemented any rate hikes yet.

In conclusion, the increase in term insurance premiums by major private sector Life insurance companies is a response to various market factors affecting the industry. Policyholders are advised to stay informed about these changes and consider their implications on their insurance coverage.