Life insurance company shares fell up to 7% on Thursday following reports that the Insurance Regulatory and Development Authority of India (IRDAI) may consider capping parent banks' share of insurers' total bancassurance business to up to 50%, according to CNBC-TV18, citing sources.

Meanwhile, at the recently held State Bank of India (SBI) Economist Conclave, Finance Minister Nirmala Sitharaman stated that while bancassurance has increased insurance penetration, it has also resulted in mis-selling. Debasish Panda, chairman of the IRDAI, has expressed increased worry over banks misselling insurance products.

In Thursday's intra-day trading on the BSE, shares of SBI Life Insurance (Rs 1,407.50) and Max Financial Services (Rs 1,100) fell 7%, while HDFC Life Insurance down 5.5 percent to Rs 643.50. At 02:14 pm, the BSE Sensex was down 1.53% at 79,003.

52-week Highs

SBI Life Insurance has fallen 27% from its 52-week high of Rs 1,935 set on September 3, 2024, as the insurer reported lower single-digit revenue growth in the September 2024 quarter (Q2FY25). According to data, Max Financial and HDFC Life are down 16% and 15% from their 52-week highs, respectively.

However, in their October 2024 life insurance quarterly assessment, Elara Capital analysts reported stronger-than-expected annual premium equivalent (APE) growth for HDFC Life, ICICI Prudential, and Max Life. As a result, sector growth for H2FY25, which was forecast at 14% YoY, is expected to be revised higher assuming growth momentum continues.

"Despite ongoing negotiations with distributors over commissions for non-linked savings products, October 2024 APE growth exceeded expectations," the brokerage business stated. Analysts predict total VNB growth of 8% YoY in H2FY25E, with lower VNB margins due to a higher ULIP mix. Lower VNB margins in FY25 are projected to have a negative impact on ROEV across companies. Furthermore, given the larger share of ULIP, which typically has weaker persistency, there may be negative operating variations in the embedded value (EV)," the analysts stated.