One basis point is a hundredth of a percentage point.
Meanwhile, Tata AIA Insurance and Max Life Insurance are offering rates of 7.27% and 7.21%, respectively, compared with SBI Life’s 6.65% and HDFC Life’s 6.9% on annuities.
State behemoth LIC is now offering 6.96%, slightly better than its larger competitors.
Max Life’s Smart Wealth Annuity Guaranteed Pension Plan, which includes a limited pay variant for personalised retirement planning, has driven a 42% growth in its retail annuity segment. However, the higher rates have impacted its new business margins, which fell to 17.5% from 22.2%.
“As we have diversified the overall annuity mix, there is an intrinsic reduction in the margin of the annuity product as well, which comes in play,” Max Life said during an investor’s call recently.While the annuity market in India is still in its early stages, insurers believe it holds long-term growth potential. With rising life expectancy and higher income levels, the demand for annuity products is expected to soar. India’s pension assets to GDP ratio was just 3.1% in 2022, compared with 78.7% in the US and 23.4% in Japan, highlighting the vast scope for growth in this sector, according to OECD data. HDFC Life’s annuity business is just 5% of its individual APE in Q1 FY25, down from 9% a year earlier. Despite the aggressive pricing from competitors, HDFC Life is maintaining a cautious growth strategy, focusing on enhancing its product offerings while adhering to pricing discipline.
“Despite facing irrational pricing in the annuity segment, with rates 70 basis points higher than listed players, we are maintaining our position due to our deep relationships,” Vibha Padalkar, MD and CEO, HDFC Life, said during the earnings call.
SBI Life has faced a 10% decline in individual annuity sales, largely due to competitive pressures. The annuity share in its product portfolio has dropped to 11.5% from 13.1% a year ago. Despite subdued growth in the first quarter, SBI Life’s management remains confident, believing their rates are competitive and anticipating a rebound in the coming quarters.
In group annuities, which involve larger transactions, SBI Life is assessing whether these deals will positively impact VoNB before pursuing them in the upcoming quarters.
