Life Insurance Sector Check - Navigating The Changes In Surrender Charges: Motilal Oswal

NDTV Profit’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..Motilal Oswal Report.New surrender charges were implemented from October 01, 2024, wherein key changes were: implementation of charges from the first year itself (earlier it was effective from the second year),a revision in the formula for guaranteed surrender value defined by the regulator, andthe discounting rate for calculation of surrender value has been linked to the 10-year G-Sec yield. These changes are likely to impact value of new business margins for listed companies in varied proportions based on their product mix (share of non-linked business), persistency assumptions in VNB calculations, and actual persistency. HDFC Life Insurance Company Ltd./SBI Life Insurance Company Ltd./Max Financial Services Ltd. have indicated 100/50/100-200 bps impact, while Life Insurance Corporation of India/ICICI Prudential Life Insurance Company Ltd. have cited minimal impact. To counter the impact, some corrections have been made in commissions – LIC has lowered upfront commissions and raised commissions in future years, and private players have altered commission structures based on agent cohorts in terms of premium size and persistency.Further, the IRRs in the non-par segment over the past three months have been reduced by ~15-43 basis points to pass on some impact to the customers. During this period, the 10-year G-Sec yield has declined by just 15bp. With insurance as a savings product becoming more liquid and agents needing to increase their business to meet their club membership targets (based on commissions), the ticket sizes are expected to increase. With all the noise and media reports surrounding the bancassurance channel, which the regulator is considering in relation to the parent bank's share in the overall bancassurance distribution of an insurance company, we believe that companies with a higher proportion of non-bancassurance channels in their distribution mix will outperform. ICICI Prudential and LIC have a significantly higher share of the non-bancassurance channel..Click on the attachment to read the full report:.Stocks To Buy: Maruti Suzuki, Hyundai Motor India, M&M Among Motilal Oswal's Top Picks In Auto OEMs.DISCLAIMERThis report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Life Insurance Sector Check - Navigating The Changes In Surrender Charges: Motilal Oswal

Motilal Oswal believes that companies with a higher proportion of non-bancassurance channels in their distribution mix like ICICI Prudential, LIC will outperform.

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Life Insurance Sector Check - Navigating The Changes In Surrender Charges: Motilal Oswal

Motilal Oswal believes that companies with a higher proportion of non-bancassurance channels in their distribution mix like ICICI Prudential, LIC will outperform.

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