Insurance stocks sell off over potential changes to bancassurance norms, insurers clarify

Bancassurance is a partnership between bank and an insurance company to allow the insurer to sell its products to bank's customers.

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26 Aug, 2025 12:21

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Shares of life insurance companies took a sharp knock, some of them falling up to 5% in trade after CNBC-TV18 reported on November 28 citing sources that insurance regulator IRDAI may consider capping parent bank's share to insurers' total bancassurance business to up to 50% only.

Later in the day, HDFC Life denied the development, calling it 'inaccurate', and based on 'rumours and speculation'.

"As an organisation, we believe that regulatory changes of such significance are typically
preceded by detailed industry consultations," HDFC Life added. The company has a well-diversified distribution network that enables to deepen insurance penetration, the statement said.

SBI Life said in a stock exchange filing, "At the outset, we would like to mention that IRDAI adopts a consultative process and seek feedback from all stakeholders which then is used to prepare the regulatory guidelines/articulate any concerns that the IRDAI may have with the industry.

"We would like to put on record, that as part of our regular interactions and consultations with the IRDAI, we have not been made aware of any such regulatory discussions around the level of insurance business being channelled through bancassurance arrangements."

Max Financial Services also said Max Life Insurance hasn't received any IRDAI directive on bancassurance capping.

The parent banks of HDFC Life, Max Life and SBI Life form 85-95% of bancassurance business, while ICICI Bank forms 50% of the bancassurance business for ICICI Prudential.

CNBC-TV18 had reported that IRDAI is concerned about the concentration of insurers' business which is dependent on bancassurance, and is likely to have asked them to limit business generated via banks to 50%. Bancassurance is a partnership between bank and an insurance company to allow the insurer to sell its products to bank's customers.

The regulator is monitoring the share of parent banks in the bancassurance business, and could consider giving the insurers a glide path in order to reduce dependencies on parent bank, it was reported.

Concerns over mis-selling or forced selling of insurance products has also in the recent past been raised the IRDAI chairman as well as Finance Minister Sitharaman. The regulator's concerns is any potential weakness relating to a bank could as a result impacting the insurance business as well, leading to policyholders suffering.

"I wish to say this for the due consideration of the bank boards, sale of insurance by banks has raised concerns of instances of mis-selling and I would say this has contributed indirectly to cost of borrowing for the customers. So, banks will have to look at this , look at their core banking activities and not burden customers with insurances they don’t require," FM Sitharaman had said at the SBI Conclave in Mumbai on November 18.

In H1FY25, SBI Life got 60% of business from bancassurance channel, largely from State Bank of India. In H1FY25, ICICI Prudential got 29% of business from bancassurance while LIC got 4% business. Max Life received 52% of business from bancassurance in H1FY25, mostly from Axis Bank, and HDFC Life received 65% of business from bancassurance in the first half of the fiscal.