Major private sector life insurance companies such as HDFC Life, ICICI Prudential, Bajaj Allianz, and Max Life Insurance have recently raised their term insurance premiums by 4-7%. This increase is in response to changes in bond yields, concerns about inflation, and adjustments in reinsurance rates, according to industry sources familiar with the situation. It is expected that many other insurers will also follow suit.
Max Life Insurance, for example, revised its term insurance rates by 3-6% in April for the fiscal year 2025. This change reflects the sensitivity of term insurance premium rates to long-duration interest rates, especially for policy terms exceeding 40 years.
The drop in yields on longer-tenure bonds, such as those maturing in 2051 and 2063, has influenced the decision of insurance companies to increase their premiums. Government initiatives, such as the introduction of a 50-year bond in the second half of fiscal year 2024, have also had an impact on bond yields.
The announcement by JP Morgan regarding the inclusion of Indian government securities issued by the Reserve Bank of India in its GBI-EM index has further softened benchmark 10-year government bond yields. This has led to a significant drop in yields since September of the previous year.
Despite these changes, SBI Life Insurance and LIC have not yet raised their term insurance rates. Kuldip Bonyal, secretary general of the Life Insurance Agents Federation of India, noted that most private life insurers have increased their rates by 5-7%, while SBI Life Insurance and LIC have remained unchanged.
In conclusion, the recent increase in term insurance premiums by major private sector life insurance companies is driven by various factors including bond yields, inflation concerns, and reinsurance rate adjustments. While some insurers have already implemented these changes, others are expected to follow suit in the near future.