Long-term prospects to strengthen investment in life insurance stocks

Taxation proposals, lower volumes may weigh on near term prospects

The 2023 Budget set off a downtrend in the listed life insurance company stocks. The key reason was a proposal to tax income from insurance policies (other than unit-linked insurance plans or ULIPs) with a premium, or aggregate premium, of above Rs 500,000 per annum. This impacted the traditional savings profile since it affected the returns for these products.

In addition, there were fears that rising interest rates would lead to more moderate ticket sizes for policies. As a result, analysts reduced expectations for key variables such as the Value of New Business (VNB) and for Annual Premium Equivalent (APE).