Insurance Amendment Bill in Lok Sabha today — Which stocks benefit and which do not

The Insurance Amendment Bill (Sabka Bima, Sabki Raksha) is likely to be tabled in the Lok Sabha on Tuesday, December 16.Multiple facets of the bill will have implications across the listed insurance universe, and across product categories.

Here’s a look at the contours of the bill and the likely beneficiaries or losers from the same:

100% FDI In The Sector

The bill, if passed, may pave the way for 100% Foreign Direct Investment in the sector.This will prove to be negative for incumbent players, particularly health insurers, as such a contour will bring in new players, mostly in the health insurance space.

In case the 100% FDI limit is approved, details such as the number of board seats for Indian residents, key managerial positions for Indian residents will have to be seen.

Merger Of Insurance Into Non-Insurance Company

Such a move will be positive for Max Financial services, as this will facilitate the merger of Max Life into Max Financial, which would lead to simplification of the corporate structure.
The move will be positive for Max Financial as a merger of Max Life will remove the holding company discount overhang from the company.

Open Architecture Not Part Of Bill

An open architecture would have meant that individual insurance agents would have been allowed to tie-up with more than one life, one general and one health insurance company.

This would have had a negative impact on entities such as LIC and SBI Life, which get 92% and 28% of their new business premium respectively, from individual agents.

LIC and SBI Life would have been the most affected as they would have had to pay a higher commission to retain those individual agents, or risk losing business.

Composite Insurance License Not Part Of Bill

The absence of the Composite Insurance License agreement from the Insurance Amendment bill is negative for stocks such as HDFC Life, LIC and Star Health Insurance.

While HDFC Life and LIC had expressed their intention to enter the health insurance business, Star Health wanted to foray into the motor insurance business.

The absence of this clause from the bill would mean these players will not be able to enter the desired areas of business.

Reduction In Capital Requirements For Reinsurers

The bill also proposes to reduce the capital requirement for reinsurance companies to ₹1,000 crore from ₹5,000 crore earlier.

A provision like this is negative for GIC Re, as it will pave the way for new players in the field, thereby increasing competition for GIC Re.