HDFC Life, LIC, other insurance stocks slide as reports hint at surrender value hike by IRDAI

On May 30, insurance stocks like LIC, HDFC Life, SBI Life, ICICI Prudential Life, and ICICI Lombard fell up to 1% after reports indicated that the Insurance Regulatory Development and Authority of India (IRDAI) might hike surrender value for insurance policies. \r

This follows IRDAI's unchanged stance on surrender value in March 2024. Surrender value is the amount paid to a policyholder when a policy is terminated before maturity, currently calculated based on premiums paid and policy duration. The proposed changes would require insurers to pay higher guaranteed and special surrender values, potentially from the first policy year. \r

Experts warn this could affect insurers' profitability and policyholders' behavior, with Kotak Institutional Equities predicting a 120-200 basis point impact on private insurers' margins.