Insurance penetration to get emphasis; SBI life insurance and ICIC pru life insurance see action

Government has extended the insurance to urban poor and poor under the financial inclusion aim and providing life insurance to more deserving population.

As India stands under penetrated in terms of insurance penetration and more so in the BPL category and rural India, Government is planning to utilise the PM Jan dhan yojana accounts to extent the micro insurance and pension scheme through these accounts. These measure are positive for the bank as it can lead to higher account openings and also more financial discipline of saving and insurance.

We see that under the Pradhan Mantri Jeevan Beema Yojna government plans to increase its base considerably as the premium collected is a minuscule of Rs12 per annum.

We expect PSU insurance companies to benefit from the same. However, this can also lead to spike in the claims and reduce profitability of the companies.

We see General insurance companies also to benefit from higher emphasis on the crop insurance and Agri logistics. Crop insurance saw major spike in FY17 growing by 25% + for most PSUs.

PSU and private insurance stocks responded positively for the same with SBI spiking by 5.2%, ICICI pru life insurance by 1.2% and HDFC life insurance by 3%.