Here is why SBI Life, HDFC Life, LIC shares rallied up to 4% on BSE today

Insurance stocks in focus: LIC has approached Irdai to increase the interest rate assumption and plan-based G-Sec assumption for the calculation of surrender value, reports say

LIC approaches Irdai for surrender value: Share prices of life insurance companies were trading firm on Tuesday, August 27, 2024. Share price of Life Insurance Corporation (LIC) gained 3.6 per cent (Rs 1,089.95) intraday, SBI Life 2.9 per cent (Rs 1,849.3), ICICI Prudential Life 2.7 per cent (Rs 743), and HDFC Life 2 per cent (Rs 740.7) on the BSE.

The uptick in share prices of insurance companies came amid a report that LIC has approached the insurance regulator Insurance Regulatory and Development Authority (Irdai) to review surrender value guidelines.

According to a report by TV channel CNBC TV-18, LIC has approached Irdai to increase the interest rate assumption and plan-based G-Sec assumption for the calculation of surrender value.

The report also comes amid reports that life insurance companies have sought more time from the regulator to implement the surrender value norms.

Surrender Value is the sum of money that an insurance company has to pay its policyholder if he/she terminates the policy before it matures.

Business Standard could not independently verify the report. LIC, on its part, had not issued any clarification till the time of writing of this report.

In June 2024, Irdai had issued a circular suggesting new norms to calculate payouts to customers who exit policies prematurely. The guidelines, which were to be implemented with effect from October 2024, raised the Surrender Value payout ratio to 75-80 per cent from the current 30 per cent.

Besides, according to the revised norms, life insurers will have to pay an enhanced special surrender value (SSV) after the completion of the first policy year, subject to the condition that the customer has paid one full-year premium.

Currently, companies do not pay such an amount to customers surrendering their policies in the first year.

Besides, the circular also stated that the discount rate to arrive at the SSV will be allowed up to 50 basis points (bps) higher than the 10-year G-Sec yield.