Rising rates take toll on insurance

MUMBAI: Rising interest rates, home loan and fixed deposit rates are deterring investors from buying large life insurance policies. Or at least discouraging them from paying large premiums for their policies.
According to insurance industry experts, although investors are buying life insurance, they seem to be deferring their spends on the products, allocating only small amounts to their insurance policies.
At present, bank fixed deposit rates are looking more attractive at around 9% compared to 6.5-7% last year at the same time. Even monthly payments towards home loans (EMIs) have gone up, increasing the financial burden on families.
This time last year floating home loan interest rates ranged between 8.75%-9%. Currently they hover around 10%-12%. To top this, experts say that the new anti-money laundering guidelines have largely affected the single premium business as well as investors buying large-ticket policies. The guidelines require the company to gather detailed information about the person buying insurance if the premium amount exceeds a certain amount.
A back-of-the envelope calculation of the latest numbers released by the Insurance Regulatory and Development Authority (IRDA) for July show that the average premiums per policy for the total industry have fallen 22% in case of regular premium products for individuals and 24% in case of individual single premium products over last year. This is despite the fact that the number of regular premium policies sold from April to July has gone up by 90%. This shows for life insurance as a whole, regular premium products are back in flavour, given 90% increase in terms of the number of polices sold. The number of single premium policies sold has fallen by 16%.
LIC has seen a drop of 24% in the average premiums per policy for regular premium products from April-July this year compared to the same period last year. Private players have seen a drop of 15%.