HDFC Life, Max Financial shares fall on IRDAI proposal of higher surrender value

This will only apply to those policies that have a surrender benefit.

HDFC Life and Max Financial fell up to 4 percent intraday on December 14 as the IRDAI proposed a higher surrender value on non-PAR products.

The IRDAI has released a consultation paper that proposes a higher surrender value on non-PAR products. This will result in policyholders receiving a higher amount following lapses in their policies, which will likely have a negative impact on the margins of non-PAR products.

At close, Max Financial shares closed lower by 3.16 percent at Rs 1,023.5, while HDFC Life shares fell 1.75 percent to Rs 686 apiece on the NSE.

Surrender value is the total payout that an insurance company gives the policyholder on the occasion of policy termination ahead of its maturity. Therefore, this will only apply to those policies that have a surrender benefit.

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Additionally, this only impacts non-PAR products, which are those in which the policy owner does not share in any profits or dividends made by the life insurance company. No bonus is paid on this policy.

Over the past few months, the IRDAI has been focussing on reforms to boost its vision of achieving ‘Insurance for All by 2047’.

On October 30, the sector regulator issued a circular directing insurance companies on the Customer Information Sheet (CIS) implementation, which aims to improve communication and transparency between insurers and policyholders. The CIS have the basic features of the policy in easily comprehensible words.

The IRDAI has set up a high-level panel to suggest steps to increase the participation of banks for easy availability of insurance products across the country.

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Despite the large network of banks through their branches across the length and breadth of the country, the contribution of the lenders as corporate agents was 5.93 percent of non-life premiums and 17.44 percent of new business premiums for life insurance in 2022-23.

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