Major private sector life insurance companies, including HDFC Life, ICICI Prudential, Bajaj Allianz and Max Life Insurance, have increased their term insurance premiums by 4-7 per cent in response to moderation in bond yields, inflation concerns, and adjustments in reinsurance rates, according to industry sources privy to the development. Many other insurers are expected to follow suit, the sources said.
“We have seen upward revisions happening (in term life insurance rates) across major life insurance companies. Bajaj Allianz Life, ICICI Prudential Life, Max Life and HDFC Life have changed rates recently,” said an insurance distributor.
“In FY25, Max Life Insurance revised term insurance rates first in April, ranging between 3 per cent and 6 per cent,” said Vaibhav Kumar, head, product management and ecommerce channel, Max Life Insurance.
“Nearly 50 per cent of our customers opt for policy terms of greater than 40 years. As a result, term insurance premium rates are sensitive to long-duration interest rates. As long-duration interest rates vary (especially when they go down), term insurance rates reflect the same. Our experience on mortality continues to be stable and in line with our assumptions,” Kumar told Business Standard.
Yield on the bond maturing in 2063 has dropped by 31 bps to 7.086 per cent from 7.39 per cent in the last one year. Similarly, yields on the bond maturing in 2051 has dropped by 32 bps in the last one year.
Insurance companies are major buyers of longer-tenure bonds. The government had introduced a 50-year bond in H2FY24 on the demand of insurance companies.
Further, the benchmark 10-year government bond yields have softened significantly following the announcement by JP Morgan that Indian government securities (G-sec) issued by the Reserve Bank of India (RBI) under the fully accessible route will be included in its widely monitored GBI-EM. Since September last year, the yield on 10-year bonds has dropped by 19 bps.
Emails sent to HDFC Life, ICICI Prudential Life Insurance and Bajaj Life Insurance did not elicit a response till the time of going to the press.
> HDFC Life, Bajaj Allianz Life, ICICI Prudential Life and Max Life raise term insurance premium rates by 4-7%
> Moderating bond yields, inflation concerns, and adjustments in reinsurance rates drive term insurance premiums
> Longer tenure bond yields drop over 30 bps in 1 year
> SBI Life, LIC have not raised term insurance rates yet
First Published: Jul 10 2024 | 9:42 PM IST
