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Life Wars

The newly opened up life insurance market is witnessing its first full-blown price war. Should customers be pleased?

By Ashish Gupta

LIC: The King no more

It's really a jungle out there. And private insurers are engaged in their first full-blown price war, slugging it out to get a slice of the insurance market pie.

The latest shot has been fired by Birla Sun Life, which has lowered its rates for high-value policies and is currently offering a Rs 25 lakh, 30-year-old policy at Rs 6,325 per year. Now that's quite competitive.

However, it was the state-owned Rs 220,000-crore Life Insurance Corporation of India (LIC) that has really taken the competition apart by launching the cheapest product in the market, which combines a whole life deal with money-back endowment policy. On July 30, the life insurance behemoth launched Anmol Jivan, a 10-year term policy for a sum assured of Rs 10 lakh for which the annual premium is Rs 2,280 for a 30-year-old policyholder.

"We are the cheapest in this segment of the market. We earlier had Bima Karan, a term-insurance policy where a policy-holder on survival, gets back the basic premium amount at the end of the policy,'' said a senior LIC official.

The price war in the term insurance market had flared up after ICICI Prudential, a joint venture between ICICI Bank and the UK-based Prudential Life Insurance, launched LifeGuard Level Term Insurance, for which a 30-year-old policy holder had to pay a premium of Rs 2,504 for a 10-year Rs 10 lakh policy.

Another notable price aggressor is HDFC Standard Life, which brought down its term rates by 20 to 40 per cent earlier this year. Back then, nobody thought anyone would dare to take it on. But now it looks like the market is set for a proper brawl.

Some analysts are pleased that insurance affordability will expand the market vastly. During LIC's monopoly, insurance didn't exist as a concept for vast sections of India. That's changing, thankfully.

Other analysts, however, are less optimistic. Their concern is the long-term survival of the insurers. The uncertain investment scenario, to their mind, calls for financial prudence. Unless the investments can deliver good returns, the aggressive buying of marketshare could prove to be a burden.

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