 "Term Life Insurance")
Shares of life insurance companies rallied up to 6 per cent on the BSE in Tuesday's intraday trade, in an otherwise weak market, after the sector regulator -- Insurance Regulatory and Development Authority of India (Irdai) -- released new regulations related to surrender charges.
In a relief for life insurance company investors, regulator Irdai has retained most existing surrender charges in the revised product regulations. However, policyholders who cancel their policies will not get as much as what was proposed under the draft exposure norms, which were aimed at curbing mis-selling in December 2023, reports suggedted.
Consequently, ICICI Prudential Life Insurance Company, Max Financial Services, Life Insurance Corporation of India, and HDFC Life Insurance Company rallied up to 6 per cent in the intraday trade. At 10:58 AM, these stocks are trading higher in the range of 1 per cent to 3 per cent. In comparison, the S&P BSE Sensex was down 0.37 per cent at 72,544. However, SBI Life Insurance was down 1 per cent at Rs 1,482.55.
Indian Life Insurers' shares performance has been greatly influenced by regulatory changes driven by the Irdai, personal taxation reforms by the Union Government, and by the actions of direct & indirect tax authorities.
The surrender charge regulation was a key overhang for the sector as the impact of exposure draft was to the tune of 300-500bp on value of new business (VNB) margins of the non-par segment, according to Motilal Oswal Financial Services.
"Resultantly, the impact on Max Life, and HDFC Life was expected to be higher given their relatively higher dependence on the segment. With this concern now behind, these stocks could outperform in the near-term," it said. The brokerage remains positive on SBI Life.
Those at Emkay Global Financial Services, meanwhile, added that the sustained underperformance of life insurers' shares seems to be pricing-in the exaggerated fear of regulatory changes while completely ignoring the franchise strength (brand, distribution and scale) of listed players. "Backed by a favorable demography and economy, we turn positive on the medium-term outlook for life insurers," the brokerage added.
