The Life Insurance Corporation of India (LIC) has taken up the gauntlet of HDFC Standard Life Insurance Company in the term assurance market.
"The state-run company will introduce its first pure term assurance product by August this year which will be priced competitively," said LIC managing director N C Sharma.
Term assurance is a pure-protection cover, wherein an individual ensures that in the event of his death during the term of the cover his dependents or business partners would be financially taken care of.
HDFC Standard Life, which offers the lowest rate on the pure-term assurance plan today, will feel the heat once LIC introduces its product in the market.
HDFC Standard Life has been keen to position itself in the market by offering attractively priced products to the customer, Nick Taket, HDFC Standard Life, appointed actuary, had said earlier.
Twenty per cent of policies written by HDFC Standard Life are term assurance covers which have mopped up 100 per cent more than what was targeted in terms of sum-assured.
World over, term products are traditionally price sensitive. However, the success of these products depend largely on volumes.
HDFC Standard Life had shot the first salvo when it slashed its premium rates on term assurance cover by 40 per cent in March. But LIC, with its 7.92 lakh field force, is too strong for any of the new players, feel analysts.
Private insurance players today rely solely on direct agents and cannot afford to compete with the incumbent, especially if its products are priced lower, analysts said.
LIC does not have a pure term assurance product in its stable. The closest term assurance product it has today is the new Biman Kiran, which offers protection and the return of premium.
Of LIC's 2.32 crore policies sold last fiscal (2001-02), Biman Kiran accounted for 6.65 per cent. On the back of demand for a pure risk product especially from the urban youth, LIC has designed the product, which will be comparable with that of HDFC Standard Life. Rural towns and smaller cities prefer to buy endowment and money-back products as they also offer policyholders an investment avenue.
