There will be a “mild increase” in premiums on term plans of Bajaj Allianz Life Insurance as the company is to an extent absorbing the increase of the rates by its reinsurers, MD and CEO Tarun Chugh said on Monday.
Addressing a virtual press conference, Chugh said it is difficult to estimate the likely impact of the Omicron variant of Covid-19 on India’s life insurance industry at present, and his company is now back to “scenario planning”, which the insurer has been doing in the last 18 months.
“The reinsurers, who usually have a lot better data than the insurance companies, have already increased prices. So, they already told us that the prices should increase after December-end,” Chugh said, replying to a set of questions on reinsurance companies raising rates for underwriting portfolios of pure protection covers.
“There will be a mild increase, and we are very mindful of the fact that this is an essential product for our customers. And hence we are keeping that in mind while we are to an extent absorbing the increase of the reinsurer, and taking a hit on the profitability and the cost of the product. But yes, because we are absorbing a little bit despite the significant increase from the reinsurer, there will be a mild increase,” he said.
Chugh said from January, life insurance companies are likely to increase premiums on term plans, but term insurance prices in India would still be “far lower” than in the developed markets.
“India is such a market where term insurance plans may already be at the lowest or almost lowest rates in the world. I think this is because of privatisation and competition. If I compare, insurance plans in India are already far cheaper than in developed countries like Singapore, the United Kingdom and Germany, which usually people would not expect. It is a fact,” he said.
Asked about the Omicron variant, Chugh said Bajaj Allianz Life Insurance is currently “waiting and watching” as there is no clear data yet on this new variant.
“Whatever happens [with] Omicron, it will surely have an impact [on the life insurance industry). If it is mild, then I think growth will be back. Growth is already there in the private insurance sector. But we can hope that things would go on as normal and there will be growth even in the next year. But if it (Omicron) becomes strong, and there is an increase in hospitalisations and deaths, then, of course, it will be impacted in a negative sense,” he said.
While launching a new saving with guaranteed life insurance plan, Assured Wealth Goal, Chugh said Bajaj Allianz Life Insurance has posted sustainable growth during the two years, despite the pandemic.
For the year-to-date till October in the current fiscal, the insurer, a joint-venture between Bajaj Finserv and Allianz, registered a 34% growth in gross written premium and a 23% rise in renewal premium. It paid total death claims of `1,374 crore during the last fiscal.
Chugh said the new product is an important milestone in the company’s portfolio. “The income need was something we had a huge gap on,” he said. The company said Assured Wealth Goal is designed to provide guaranteed, tax-free income for 25 or 30 years as chosen by the customer. At the end of the income period, the customer has the option to receive all premiums contributed during the policy.