Life insurance stocks: Why Emkay sees zero probability of any shocker in Budget 2026

Ahead of the Union Budget 2026 on February 1, Emkay Global said the run-up to the event is driving volatility in life insurance stocks, reflecting precedents set by Budgets over the past six to seven years, a period that largely coincided with the history of listed life insurers in India. Emkay Global said multiple tinkering with the personal income tax regime since February 2020, as well as changes to tax limits on maturity proceeds of ULIPs and traditional products, has dampened the attractiveness of life insurance products. 

The weakening value proposition of life insurance savings products has affected long-term resource mobilisation, a key requirement in a capital-short economy like India, it said.

Budget 2026: A non-event 

Notwithstanding these hiccups in recent years, Emkay Global said it sees near-zero probability of any major shock for the life insurance sector in the forthcoming Budget. Its confidence is underpinned by the fact that the government is concerned about the large underinsured and uninsured population and has acted by bringing GST reforms and passing of the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025. 

"The sustained mention of high operating cost being a detriment to increasing insurance coverage, in the IRDA Annual Report, RBI FSR, and now in the Economic Survey clearly indicates that the government and regulator intend to increase insurance coverage," Emkay Global said.

By taking a GST hit, the government has done its bit, and now wants insurers to step up on their part, it noted. 

"In this backdrop, it is unlikely that the Budget 2026 will tinker – to any extent – the corporate tax rate for life insurers or personal income tax for individuals, to avoid hurting the government’s effort to increase life and health insurance coverage," it said.

Life insurance stocks

The brokerage has 'Buy' rating on HDFC Life and SBI Life and 'Add' rating on ICICI Prudential Life, Max Financial Services and Life Insurance Corporation of India. 

Emkay Global said thesequence of actions from the government and regulator in the past six months suggests that this time it is different, and the government and regulator are concerned about stagnating insurance coverage and a large uninsured and underinsured population. 

"By exempting Individual Life and Health Insurance from the GST ambit, the governments (central and state) have taken the hit on their revenue, and their message to the industry is clear. Now it is the industry’s turn to deliver by addressing the insurance coverage for the uninsured and underinsured," it said.