Insurance stocks eye gains as govt moves to 100% FDI; Bernstein sees long-term upside for life insurers

The government is set to introduce the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025, in Parliament today, December 16, to boost foreign investment and expand insurance coverage across India by 2047.

The Bill proposes amendments to the Insurance Act, 1938, the Life Insurance Corporation Act, 1956, and the Insurance Regulatory and Development Authority Act, 1999.

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Shares of major insurance companies showed mixed movements in trading on Tuesday. ICICI Prudential Life Insurance slipped slightly by 0.05 per cent to 648.65, while ICICI Lombard General Insurance rose 0.56 per cent to 1961.55.

SBI Life Insurance gained 0.62 per cent to 2047, and HDFC Life Insurance advanced 0.98 per cent to 779.85.

Among others, General Insurance Corporation of India fell 0.65 per cent to 380, Star Health and Allied Insurance declined 0.76 per cent to 464.65, Life Insurance Corporation of India edged down 0.11 per cent to 856.35, and Canara HSBC Life Insurance dropped 0.69 per cent to 122.65. Overall, the sector displayed a mix of small gains and losses.

Bernstein On Insurance Sector

Analysts see potential opportunities for investors following these reforms. Bernstein notes that cheaper insurance through deferred commissions may lead to near-term adjustments but expects long-term gains.

The report recommends Indian life insurers for modest growth and attractive valuations, highlighting Max Financial, SBI Life, and HDFC Life as outperformers, while ICICI Prudential Life and LIC are expected to perform in line with the market.

PB Fintech is highlighted for its leadership in terms and health insurance and a strong online franchise.

What Proposed Amendments Will Change?

Under the proposed amendments, the Foreign Direct Investment (FDI) limit in the insurance sector will rise from the current 74 per cent to 100 per cent.

Despite this increase, the law mandates that one of the top officials, the Chairman, Managing Director, or CEO, must be an Indian citizen. The Bill also allows for the merger of a non-insurance company with an insurance company, facilitating consolidation and expansion within the sector.

As per a Zee Business report, the Insurance Amendment Bill has removed the cap on commissions and remuneration, with the IRDAI now empowered to decide the exact structure.

The Bill also proposes the establishment of a Policyholders’ Education and Protection Fund to safeguard insurance buyers’ interests.

The Bill aims to improve the ease of doing business for insurance companies, intermediaries, and other stakeholders, while increasing transparency and enhancing regulatory oversight.

It also adjusts the terms of office for the Chairperson and whole-time members of regulatory bodies, offering a five-year tenure or until the age of 65, whichever is earlier.

Currently, the upper age limit is 62 years for whole-time members and 65 years for the Chairman.

Finance Minister Nirmala Sitharaman, in this year’s Budget speech, had proposed raising the FDI limit to 100 per cent as part of “new-generation financial sector reforms.” So far, the insurance sector has attracted Rs 82,000 crore through FDI.

The proposed amendments to the LIC Act will empower its board to take operational decisions independently, including branch expansion and recruitment.