HDFC Life, SBI Life: Why did insurance stocks take big hit today?  

Shares of HDFC Life Insurance Company Ltd and SBI Life Insurance Company Ltd took a beating on Thursday, falling up to xxx per cent amid reports of the regulator IRDAI (Insurance  Regulatory  and  Development Authority of India) was planning to introduce cap on insurance business emerging from banks. SBI Life tanked 5.15 per cent to settle at Rs 1,427.95 on BSE.

HDFC Life shares dropped 3.4 per cent to eventually closed at Rs 657.60 on BSE. HDFC Life said the news flash was based on rumours and speculation and that it categorically stated that the information mentioned was inaccurate.

"As an  organisation, we  believe  that  regulatory  changes  of  such  significance  are  typically preceded by detailed industry consultations.   HDFC Life has a well‐diversified distribution network which enables us  to increase insurance  penetration in our country and adapt to the evolving business environment.  We remain focused on serving our customers and partners with commitment and excellence," it said.

IRDAI was reportedly concerned about the concentration of insurers' business that is dependent on bancassurance, and is likely to have asked them to limit business generated via banks.

Sources told CNBC TV18 the IRDAI was considering limiting the share of bancassurance business contributed by parent banks to 50 per cent of an insurer's total distribution. Currently, parent banks contribute a significant portion of the bancassurance revenue for major insurers, it suggested. As per the report Max Life, HDFC Life and SBI Life rely on their parent banks for 85-95 per cent of bancassurance sales. ICICI Prudential Life sees around 50 per cent of its bancassurance business coming from ICICI Bank.

Max Financial Services shares fell 4.99 per cent to Rs 1,128.60. ICICI Prudential Life Insurance Company Ltd ended 1,98 per cent higher at Rs 694.25.