Jefferies report unveils potential disruptions in insurance sector with new threshold premium concept

Jefferies report unveils potential disruptions in insurance sector with new threshold premium concept

Jefferies has shed light on a groundbreaking development that could reshape the insurance industry – the introduction of the “threshold premium” concept. While still in the consultation stage, this innovative idea has the potential to significantly impact insurers by influencing surrender values and, subsequently, trimming fees inversely.

According to Jefferies analysis, the proposed threshold premium concept is currently in the consultation stage, with final terms to be determined through ongoing deliberations. The report highlights that this potential shift could introduce a new dynamic to the insurance sector, prompting insurers to reassess their strategies and adapt to the evolving regulatory landscape.

Jefferies analysis also points to non-unit-linked insurance products (non-UILP), which currently constitute 40-45% of premiums and Value of New Business (VNB), as being directly affected by the proposed changes. This insight suggests that insurers may need to reevaluate their product portfolios to align with the evolving regulatory framework.

The report further notes that market dynamics could shift, creating winners and losers among insurance companies. Jefferies identifies Max Life and HDFC Life as potential beneficiaries with a higher market share, while SBI Life may face challenges amid this regulatory overhang.

As the insurance industry navigates this potential paradigm shift, the Jefferies report emphasizes the importance of active participation in the consultation process. The insights gathered during this period will play a crucial role in shaping the final terms and determining how insurers can adapt to this innovative approach.

With the industry on the cusp of transformative changes, insurers are urged to stay abreast of developments, actively contribute to the regulatory dialogue, and prepare for a future where the threshold premium concept could redefine the traditional norms of the insurance sector.