Top Private Sector Life Insurers Increase Term Policy Premium by 4-7%

Major private life insurers in India, including HDFC Life and ICICI Prudential, have raised term policy premiums by 4-7% due to moderating bond yields and inflation concerns. State-owned insurers LIC and SBI Life have not yet increased rates.

As per the sources of the industry, many leading private players offering term insurance policies in India have hiked their tariffs by 4-7 % in recent times. This hike arises due to the moderate bond yields, inflation worries, and changes in reinsurance costs.

Some of the insurers who have effected these hikes include HDFC Life, ICICI Prudential Life, Bajaj Allianz Life and Max Life Insurance. This is set to be replicated by other insurance companies in the coming weeks as they seek to cut on costs.

Vaibhav Kumar of the product management and e-commerce channel of Max Life Insurance stated that his company has also upwardly adjusted term insurance in April with rates rising from as low as 3% up to 6%. Kumar mentioned that this is due to the linkage of term insurance premium with long duration interest rate which is even more sensitive since half of their customers prefer policy terms greater than 40 years.

The yields on the longer-dated government bonds have also reduced in the last one year. For instance, the yield on bonds due 2063 has reduced by 31 basis points to 7 per cent. 086% from 7. 39% a year ago. Likewise, for the bonds that are to mature in the year 2051, yields have come down by 32 basis points during the same period.

Among these, insurance firms are the most sensitive to such changes in yields because longer-tenure bonds are their regular purchases. The government came up with a 50-year bond in the second half of the last fiscal year partially due to the pressure from insurance firms.

However, Kuldip Bonyal, secretary general of the Life Insurance Agents Federation of India said that most of the private players have passed on the increase but the state owned Life Insurance Corporation of India (LIC) and SBI Life Insurance have not announced any increase in term insurance rates till date.

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Thus, consumers might have to redefine their insurance needs given the emerging trends with respect to these premium hikes.