IRDAI Proposal May Raise Surrender Values, Trim Insurers' Fees, Say Analysts
The move could also attract customers, who have stayed away from the segment, they said.
The Insurance Regulatory and Development Authority's new consultation paper on increasing the surrender value for life insurance policies may also trim fees for insurers, according to analysts.
The move could also attract customers who have stayed away from the segment, they said.
Here is what analysts had to say about the impact of the new proposal:
Jefferies
New concept of threshold premiums may raise surrender values.
May trim fees for insurers.
Insurers may offset some impact by lowering their costs.
In case surrender charges are cut, then insurers may pull back on commission costs.
May impact their ability to penetrate into deeper tier-2 or 3 markets, where customers aren't as mature.
Morgan Stanley
Defining the threshold value as a percentage of total premiums could be a mitigating option.
Industry could also claw-back clauses for commissions that are paid.
May also consider superior returns for those not seeking liquidity.
New move could also attract customers to the segment, who previously stayed away from it.
Nomura
The move could lead to higher surrender values and lower VNB margins for non-linked insurance products.
May also have significant implications on the product design, viability, and pricing for these non-linked products.
If implemented, could adversely impact the internal rate of return on non-linked products.
May also deter long-term investing by policyholders.
Max Life Insurance Co., HDFC Life Insurance Co. to see the most impact and SBI Life Insurance Co. expected to remain insulated.
