Slowdown can cause hiccups, says SBI Life Insurance

If there is a slow down in the housing sector due to higher interest rates, SBI Life Insurance thinks its housing insurance portfolio, which contributes almost 50 per cent of its premium income, will be affected.

A 74:26 joint venture between State Bank of India and French insurer Cardiff SA, SBI Life had garnered a new premium income of Rs 169.39 crore as on September 30, 2004.

S Muralidharan, chief marketing officer, SBI Life, told Business Standard, "When the growth of housing loans slows down, naturally insurance product linked to it will also slow down."

Muralidharan said the high rate rise on housing loans will take a long time to negatively impact the growth of housing loans. He sees it happening only if the rate rise is erratic.

He said SBI Life's premium income from housing insurance portfolio increased to Rs 45 crore in October 2004 from Rs 31 crore in September 2004.

Over 70 per cent of its premium income comes from parent State Bank of India through the bancassurance channel.

Under the housing insurance scheme, the borrower pays a one-time premium to get insurance to cover the outstanding dues during the entire period of the housing loan.

In the event of the borrower's death, SBI Life Insurance will assume the responsibility of repaying the outstanding loan amount, including interest calculated as per the original repayment schedule.

This policy is given as a choice to customer when he takes a housing loan from State Bank of India (SBI) or Sundaram Home Finance.