Life Insurance Stocks Surge by up to 5% on IRDAI’s Surrender Value Regulations

On March 26, 2024, the shares of life insurance companies like Max Financial Services Ltd and HDFC Life Insurance Company Ltd rose up to 5% intraday. This positive development was noticed after the Insurance Regulatory and Development Authority of India’s (IRDAI) notification on the final regulations in relation to surrender value.

Impact of IRDAI’s Guidelines

On Tuesday, at 11:37 AM, Max Financial Services shares were trading higher by 4.50% at ₹986.55, while HDFC Life Insurance Company share pice rose 1.61% to ₹633.90 per share on the NSE.

The Insurance Regulatory and Development Authority of India’s final guidelines stated that the surrender values for life insurance policies are expected to mostly remain the same or even lower if policies are surrendered for up to a period of 3 years. For life insurance policies surrendered from the 4th to 7th year, surrender value may see a small increase. This will come into effect from April 1, 2024.

IRDAI announced that if an individual holds on to the policy for a higher duration, the surrender value will be higher and vice versa.

This development from IRDAI comes after considering concerns pointed out by life insurers.

Surrender value is the total payout that an insurance company gives the policyholder on the occasion of policy termination before its maturity. Hence, this feature applies only to policies offering a surrender benefit.

In December 2023, the IRDAI proposed regulations that laid the groundwork for introducing threshold premiums and increased surrender values for endowment policies.

Over the past few months, the insurance regulator has focused on reforms to expand its vision of achieving ‘Insurance for All by 2047’.

On October 30, 2023, the sector regulator issued a circular directing insurance companies on the Customer Information Sheet (CIS) implementation. The objective was to enhance transparency and communication between insurers and policyholders. The CIS will have the basic features of the policy in easily understandable words.

Managing Director and Chief Executive Officer of Bajaj Allianz Life Insurance, Tarun Chugh, stated that IRDAI has taken a good and balanced approach on the surrender value. He added that because of the final surrender value regulations, there won’t be much impact on the life insurers, and the biggest losers in case of higher surrender value would have been customers.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.