Bank-backed private life insurers' scrips tumble on banca limit reports

Shares of bank-backed private life insurance companies tumbled on Thursday after reports suggested that the Insurance Regulatory and Development Authority of India (IRDAI) might limit the parent bank's share in insurance companies' total bancassurance business to 50 per cent.

Bancassurance refers to a partnership between banks and insurance companies to sell insurance products through bank branches.

State Bank of India (SBI)-backed SBI Life Insurance saw its share price decline by 5.1 per cent, while HDFC Bank-backed HDFC Life Insurance dropped by 3.36 per cent.

Similarly, Max Financial-backed Max Life Insurance saw its shares fall by 4.02 per cent. However, ICICI Bank-backed ICICI Prudential Life Insurance was an outlier, with its share price increasing by 1.62 per cent.

In an exchange notification, SBI Life Insurance said: As part of our regular interactions and consultations with IRDAI, we have not been made aware of any such regulatory discussions regarding the level of insurance business being channelled through bancassurance arrangements.

HDFC Life, in a similar exchange notification, called the report speculative .

The news flash is based on rumours and speculation, and we would like to categorically state that the information mentioned is inaccurate. As an organisation, we believe that regulatory changes of such significance are typically preceded by detailed industry consultations, the company clarified in its exchange filing.

 According to a CNBC TV18 report, IRDAI is concerned about the concentration of insurers' business dependent on bancassurance. The regulator is reportedly considering asking insurers to cap the business generated through banks at 50 per cent. IRDAI is monitoring the share of parent banks in the bancassurance business and may give insurers a glide path to reduce their dependence on parent banks, the report observed.

Previously, both the finance minister and IRDAI chairman have expressed concerns about mis-selling or forced selling of insurance products and urged banks to focus on their core banking services.

In October 2023, IRDAI formed a task force to review the existing bancassurance framework and improve its efficiency amid complaints of mis-selling or forced selling of policies.

In the first half of 2024-25, SBI Life derived 60 per cent of its business from the bancassurance channel, ICICI Prudential received 29 per cent, and Life Insurance Corporation of India got 4 per cent. Max Life received 52 per cent of its business from bancassurance, while HDFC Life derived 65 per cent of its business from this channel.

www.business-standard.com, dt. 29-11-2024