Life insurance market is growing in India and there are many international players who are entering the market. Without going into details of regulatory framework, we foresee that life insurers can play a very active role in this segment of business and thus have a good growth in their portfolio. The reasons behind this thinking are
Life insurers have better research about mortality trends and so they have better ability to measure longevity risks which is one of the major risk in the product. This also helps in development in the market as the life insurers can provide option of life annuity to borrowers rather than payment for fixed term. A life annuity will help the borrower to have income even at the time when he is very old.
Reverse Mortgage is a long term product. Life insurers being long term players in the financial market, they have ability to estimate and manage long term interest rate movements and thus manage the interest rate and other risk in better manner.
Life insurers are on a better footing to hedge reverse mortgage product risk with their portfolio of life insurance benefits.
As at present, India is poised for a strong economic growth, we must not miss any avenue to accelerate or support the growth momentum. Home equity/ Reverse Mortgage products are such products that have the potential of not only increasing the liquidity in the economy but also diversifying many risks. Besides insurance and pension products, actuaries with their long term horizon are in the position to play a leading role in designing products like reverse mortgage needing inputs both from actuarial and finance/investment domains.
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