The Reserve Bank of India (RBI) has proposed tighter rules on how banks sell insurance products alongside loans, and that could pinch profits for several listed life insurers. According to a February 11 report by Jefferies, the impact may not be major at the top-line level, but certain high-margin segments, such as credit protect, could take a hit.
Jefferies says credit protect products account for about 1–6% of annualised premium equivalent (APE), but form a higher share of value of new business (VNB). That means even a small dent in volumes can affect profitability more than revenue.
In life insurance, the value of new business (VNB) measures the present value of profits from policies sold during a specific period, usually a financial year.
The brokerage believes the effect will vary across companies. ICICI Prudential Life and HDFC Life have higher exposure to this segment than Max Life and SBI Life. On the banking side, fee income pressure may be manageable overall, though smaller private banks could feel more strain.
Jefferies says, “Tighter norms can impact part of these profits.”
RBI targets bundled insurance with loans
Jefferies says the RBI has proposed stricter norms around bundling insurance products with banking products such as loans. Banks will still be allowed to cross-sell insurance, but only with explicit customer consent.
This means a loan cannot automatically carry an attached credit protection policy unless the customer clearly agrees. Credit protect policies are often sold along with home loans, personal loans and other retail credit products. Jefferies notes in its report, “RBI proposes to tighten norms on bundling of insurance products with banking products like loans. Banks can cross-sell with the explicit consent of the customer.”
Jefferies adds that “This may impact credit protect sales as it’s attached to bank loans.” The brokerage does not assume a collapse in volumes, but it flags a meaningful slowdown risk.
Credit protect: Small share of APE, bigger role in VNB
Jefferies estimates that credit protection forms roughly 1–6% of annualised premium equivalent (APE) across major life insurers. On the surface, that does not look alarming.
However, annualised premium equivalent (APE) alone does not tell the full story. Credit protect products typically carry better margins than many savings-linked policies. As a result, their share in value of new business (VNB) is higher than their share in annualised premium equivalent (APE), the report explained.
The report states, “CP segments form 1-6% of APE and higher share of VNB.” That is the key pressure point. If these sales slow, profitability growth could moderate even if overall premium growth holds up.
Jefferies shows credit protect as a visible slice for HDFC Life and ICICI Prudential Life, while it is lower for SBI Life and Axis-Max Life.
Jefferies makes it clear that the effect is not uniform across the sector. Companies with greater reliance on bank channels and loan-linked sales face a higher risk to VNB margins.
Banca channel, or bancassurance, is a strategic partnership where banks sell insurance products directly to their customer base, acting as an agent for insurance companies.
Jefferies on HDFC Life Insurance Company
Jefferies values HDFC Life at 2.3x Mar-28E embedded value (EV) and assigns a price target of Rs 900. The brokerage expects embedded value to compound at 15% over FY25–FY28.
At the same time, HDFC Life has relatively higher exposure to credit protect compared with some peers, as shown in Jefferies’ product mix chart.
Jefferies notes that “ICICI Prudential Life Insurance Company & HDFC Life have higher share than MAX & SBIL.” That places HDFC Life among those more sensitive to changes in loan-linked sales.
If tighter norms reduce attachment rates, HDFC Life’s value of new business margins could see some compression, as per the report.
Despite that, Jefferies maintains a positive stance and says its multiple “reflects higher margins and a diversified biz model.”
Jefferies on ICICI Prudential Life Insurance Company
Jefferies values ICICI Prudential Life at 1.7x Mar-28 embedded value (EV), with a price target of Rs 820. Embedded value (EV) is expected to compound at 13% over FY26–FY28.
Like HDFC Life, ICICI Prudential has a meaningful share of credit protect in its mix. The report groups IPRU with HDFC Life as having higher exposure relative to Max and SBI Life.
That suggests ICICI Prudential could also face some moderation in high-margin business if loan bundling slows. Even if annualised premium equivalent (APE) impact stays within the 1–6% band, value of new business sensitivity may be sharper, as per the report.
Jefferies still keeps a Buy rating on the stock and does not alter its long-term assumptions in this note. The concern is more about incremental profit pressure rather than a structural derailment.
The firm’s broader risks for ICICI Prudential include “slower growth in protection products” and “limited recovery in APE growth.” The RBI move adds one more variable to watch.
Jefferies on SBI Life Insurance Company
Jefferies values SBI Life Insurance at 2.2x March 2028 estimated embedded value (EV), with a price target of Rs 2,510. Embedded value (EV) is projected to compound at 17% over FY25–FY28.
In terms of product mix, SBI Life has a lower share of credit protect compared to HDFC Life and ICICI Prudential Life, according to Jefferies’ estimates.
That means SBI Life may be relatively insulated if bundling norms reduce attachment rates. The impact on annualised premium equivalent (APE) and value of new business should be milder than for peers with heavier loan-linked exposure.
Jefferies’ risk factors for SBI Life focus more on adoption within the SBI customer base and growth in non-par products. The RBI proposal does not appear to materially alter its thesis here.
Even so, any broad-based slowdown in bank-driven protection sales can influence sector sentiment, and SBI Life may not be entirely immune, it explained.
Jefferies on Max Financial Services (Axis-Max Life)
Jefferies values Axis-Max Life at 2.3x Dec-27E price-to-embedded value (P/EV), with a price target of Rs 2,130. Embedded value (EV) is expected to compound at 18% over FY25–28E.
Among the four major listed players discussed, Max has relatively lower exposure to credit protect compared to ICICI Prudential and HDFC Life, as per Jefferies’ estimates.
This lower dependence could cushion it from any slowdown in loan-attached policies. While banca remains important, the mix difference provides some buffer on the value of new business (VNB) sensitivity.
Jefferies flags risks such as slower digital growth and higher exposure to non-par savings, but it does not single out credit protect as a key vulnerability in the same way as for some peers.
That said, sector-wide regulatory tightening often affects sentiment across stocks, even if company-level exposure differs.
What about banks?
Jefferies also looks at the banking angle. It says the impact on bank fee income and profits “may be manageable; higher for smaller private banks.”
Banks that rely heavily on cross-selling insurance with loans may see some moderation in fee income. However, for large diversified banks, insurance commissions form only a part of total non-interest income, and it is further added.
Jefferies values Axis Bank at Rs 1,550 based on a sum-of-the-parts approach, valuing the core bank at 1.7x Mar-28E adjusted price-to-book (P/B). The brokerage does not suggest a major earnings downgrade at this stage.
Conclusion
The RBI’s proposed tightening on bundled insurance sales may not dent overall premium growth sharply, but it could nibble at a high-margin corner of the life insurance business.
HDFC Life Insurance Company and ICICI Prudential Life Insurance Company appear more exposed, while SBI Life and Max Life look relatively better placed. Banks may see manageable impact, with smaller private banks more vulnerable, as per the report.