As we know, Corona Virus has caused various problems for the human race. But, did you know that this disease can also affect your Life Insurance? Recently, a news article on Rajkotupdates.news revealed that the third wave of Corona Virus has hit the Indian soil. What’s more, it is affecting the standards of Life Insurance.
reinsurance companies have increased their rates by 30 per cent
The Corona Virus has made the insurance industry nervous. It has affected various companies in different ways, but one thing that has not changed is its impact on life insurance. As a result, many life reinsurers have increased premium rates. Some have gone as far as increasing premium rates by as much as forty or fifty percent. Others are waiting for the virus to strike first and then adjust their rates accordingly.
The Corona third wave has already affected many lives in India, and the life insurance industry is no exception. It has caused large falls in sales volumes. Sales volumes in September 2017 fell 30% compared to September 2016, then grew by 5% in October and November, and then by 20% and 50% in January 2018. At the same time, claims have skyrocketed.
The first wave caused huge losses for life insurance companies, and reinsurers responded by raising rates by 20 to thirty percent to regain their losses. But the second wave still hasn’t slowed down, and many small life insurance companies have closed their doors.
While the full impact of the COVID-19 pandemic has not yet been determined, life insurance companies are preparing for it. In the meantime, premium rates will likely increase 20% to thirty percent for the duration of the pandemic. However, life insurers will likely be cautious in their increases.
As more people turn to life insurance as their primary protection, the third wave has led to increases in rates and coverage. It’s important to educate yourself on life insurance so you can make informed decisions. Ask your agent about any changes made in the market that may impact your rates or coverage.
LIC has increased reinsurance premium by Rs442 crore
LIC has increased its reinsurance premium by Rs442 crore to remain competitive against the private sector. The reinsurance market is highly competitive and once LIC is listed, it will face stiff competition from private players. Other risks that the insurer faces include loss of customer confidence and deteriorating financial conditions. The company’s reputation could also be damaged if it receives negative publicity. Moreover, the company may also face difficulties in retaining individual agents. Most of its new business premiums are procured by these agents.
The company’s embedded value is estimated at about 4-5 lakh crore rupees, according to a government-appointed actuary. This value is based on the present value of assets and future profits, which is a standard industry valuation method. The company’s market value is likely to be three to four times its embedded value, which would give it a value of Rs12.4 lakh crore to Rs 16.2 lakh crore. However, some analysts argue that the company’s value is lower than the market value.
While there are many private life insurance companies in India, LIC has a brand equity and trust among the populace that many private companies lack. This helps the company negotiate better terms with reinsurers. Moreover, LIC is expected to meet the central government’s disinvestment target of Rs 78,000 crore in FY22.
The government’s divestment department did not respond to a request for comment. Despite these challenges, analysts expect a robust demand for the IPO from retail investors. And the company’s position as a leader in the insurance industry may attract institutional and anchor investors.
LIC’s withdrawal from the market has led to large falls in sales
LIC’s withdrawal from the market has had a negative impact on the company’s sales. The company’s sales in single-premium policies and pension policies have both fallen considerably. This is in sharp contrast to the huge growth the insurer had registered in 2001-2002 when it offered high-assured-return plans. However, these schemes were later withdrawn or scaled down. According to sources, LIC’s business will decline by between 30 and 40% from its peak in 2001-2002.
The decline in LIC shares is linked to weak overall market sentiment and the market’s slump since May 4, when the government proposed the IPO. However, the sale did not go as planned – the Indian government did not take advantage of the interest in LIC from foreign anchor investors. Moreover, the presentations abroad did not go as smoothly as planned.
It should not worry too much about this drop, as the company has been investing in green IPOs in the past. In March 2018, LIC had invested Rs 2,843 crore in Hindustan Aeronautics Ltd. Since then, the value of this investment has fallen to around Rs 1,751 crore. Further, it has also invested in MSTC, formerly known as Metal Scrap Trading Corporation, and Bharat Dynamics. Despite this large fall, LIC has a long runway to expand its business.
Although India is currently experiencing an epidemic of COVID-19, the government plans to sell part of LIC in a subsequent IPO. However, the government is still trying to determine the “embedded value” of LIC’s shares. This is a measure of the future cash flows a life insurance company will generate.
The IPO is open to retail investors and institutional investors and is scheduled to close on May 9. The government is aiming to dilute its 3.5 percent stake in the insurance behemoth, as it has done with Saudi Arabian Oil Co. LIC has fixed a price band of Rs902 to Rs949 per equity share.
After years of losses in sales, the government aims to bolster its finances through a stake sale. However, the sale will fall short of the government’s divestment target of 650 billion rupees. Meanwhile, LIC is losing market share to private insurers.