HDFC Life, LIC, and Other Insurance Stocks Faces Turbulence Amid Surrender Value Hike Reports

On May 30, shares of insurance companies like LIC, HDFC Life, SBI Life, ICICI Prudential Life, and ICICI Lombard fell by up to 1%. This drop came after reports suggested that the Insurance Regulatory Development and Authority of India (IRDAI) might increase the surrender value for insurance policies.

Sources told CNBC-TV18 that IRDAI might require insurers to pay higher guaranteed or special surrender values if policyholders decide to end their policies early. This comes after the regulator chose not to change surrender values in March 2024.


Surrender value is the amount an insurance company pays when a policyholder ends their policy before it matures. The amount depends on factors like the number of premiums paid and the duration of the policy.

Currently, if a policy is surrendered in the first year, no amount is paid. If surrendered in the second year, the policyholder gets 30% of the total premiums paid. This increases to 35% in the third year and 50% between the fourth and seventh years. In the last two years, the payout is 90%.

The new proposal suggests that insurers might have to pay higher guaranteed and special surrender values. Guaranteed value is the minimum amount paid, while special surrender value is usually higher.

IRDAI might also require special surrender values to be available from the first policy year, unlike the current rule where surrender value is available only after three annual premiums are paid.

Experts believe that if IRDAI increases the surrender value, it could affect insurers’ profits and change how policyholders behave.

A report by Kotak Institutional Equities in December noted that, while it’s too early to fully understand the impact, there could be a 120-200 basis point reduction in the margins of private insurers.

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