Hdfc Standard Cuts Premiums

HDFC Standard Life Insurance Company reduced premium rates by 20 to 40 per cent on term assurance plans last week.

Since HDFC Standard Life launched its term product, it has mopped up 100 per cent more than what was targeted in terms of sum assured. "The amount of cover taken was 100 per cent more than what we had anticipated. This helps spread expenses across a larger business. The cut in premium rates is a correction," said Nick Taket, HDFC Standard Life appointed actuary.

This move by HDFC Standard Life has stirred the competition. However, players are not looking at any rate war, stating that the aggressive pricing by HDFC Standard Life does not leave much scope for further cuts. "We may match the rates or restructure the portfolio, but we cannot go below HDFC Standard Life's rates," said ICICI Prudential Life Insurance CEO Shikha Sharma.

With this reduction, HDFC Standard Life is priced among the lowest in the life insurance industry. However, ING Vysya Life Insurance offers term as a rider on any of its base policies at a marginally lower cost than that of HDFC Standard Life.

"We wish to position ourselves as a company that offers attractively priced products to the customer," said Taket. Term products traditionally, world over have been a price sensitive set of products.

Other life insurance companies are not readying themselves to take up the challenge. Said OM Kotak Mahindra Life Insurance CEO Shivaji Dam: "I do not want to indulge in a rate war and nor would like to start one. We feel that our pricing has been done right, and we will weigh all the pros and cons to counter this". Prior to the reduction in the rates by HDFC Standard Life, OM Kotak was the lowest priced in the industry.

Most of the companies are looking at other options without reducing rates. One possibility could be to offer value addition by offering an additional cover to another person but at a lower premium rate.

Max New York Life CEO Tony Singh told Business Standard: "Our products are fairly priced and we are not looking at revising the same. Pricing is a function of various factors. As and when these change materially, we will evaluate our pricing". More than 90 per cent of Max New York Life policies sold are whole life and hence there is little or no impact, he added. The company has a five- year renewable and convertible term product, which is bought for reasons such as low price and the option to convert into a permanent policy (endowment/whole life) without any medical examination.

On the other hand, 20 per cent of policies written by HDFC Standard Life come from term assurance policies. Term assurance is a pure protection cover, wherein an individual ensures that in the event of his death during the term of cover, his dependents or business partners would be financially taken care of.

When HDFC Standard Life first introduced the term assurance plan, there was no existing plan to benchmark the rate against or any past industry experience. "As more players entered, we have adjusted the rates from our point of view," said Taket.