SBI Life, Max Fin, HDFC Life, LIC share price targets: IRDAI may need to revisit proposed cap, says Systematix

Systematix Institutional Equities, in its latest note on the life insurance sector, retained its ‘Buy’ rating on six stocks — SBI Life Insurance Company Ltd, Max Financial Services Ltd, HDFC Life Insurance Company Ltd, Life Insurance Corporation of India (LIC), ICICI Prudential Life Insurance Company Ltd and Canara HSBC Life Insurance Company Ltd — saying IRDAI’s proposal to replace product-level allowances with a single company-level ratio in its consultation paper on commissions overlooks the two factors that drive Expenses of Management (EoM).

Systematix cited two key drivers: product mix, including term versus savings or ULIP versus annuity, and the mix of single-premium versus regular-premium flows.

"We think these two factors are important and IRDAI may have to revisit the proposed caps," Systematix said.

Systematix set targets of Rs 2,100 on Max Financial, Rs 2,350 on SBI Life, Rs 700 on HDFC Life, Rs 190 on Canara HSBC Life, Rs 600 on ICICI Prudential Life and Rs 500 on LIC.

IRDAI has proposed replacing the 2023 product-wise life EoM schedule with a single company-level cap based on total expenses divided by total premium.

The private-life expense ratio was about 20 per cent in FY26, with the proposed change implying a 500–750 basis point squeeze, enforced within a tighter commission grid.

After 2023, there was no product cap, only the EoM envelope. The consultation paper has restored ceilings that include rewards, reimbursements and related-party pay, Systematix said.

"On individual savings/par/non-par/ULIP, IDEs (banks, brokers, aggregators) get 5–20 per cent first year by premium-paying term and 2–3 per cent renewal; tied agents get 6.25–25 per cent and 5 per cent renewal, stepping up 0.5 percentage points every three years from year 6, capped at 7 per cent," Systematix said.

It said regular-pay term is richer, with IDEs getting 25 per cent/7.5 per cent and agents 30 per cent/10 per cent. Single-premium savings is capped at 1–2 per cent, while single-premium term is capped at 7.5–10 per cent. Group term, annuities and fund-based business sit in the low single digits.

Credit life sold by the lender is cut to 2 per cent for single-pay and 2.5 per cent/1 per cent for regular-pay, against observed payouts of around 45 per cent. Open architecture is paid less than tied agency, while rural first-year business can add 10–20 per cent of the applicable cap.