Insurance stocks fell on Tuesday (Nov 19) following Finance Minister Nirmala Sitharaman’s comments advising banks to focus on core banking and avoid overselling insurance products.

At the time of writing, SBI Life Insurance shares are down over 3%, making it one of the worst performers in the sector.

HDFC Life Insurance and ICICI Prudential Life Insurance both fell nearly 3%.

Meanwhile, ICICI Lombard General Insurance was down 1.3% and Star Health Insurance was down 1.24% at ₹457.75 each on the BSE.

Speaking at a recent event, the finance minister expressed concern over the mis-selling of insurance products by banks, citing its impact on customers.

“The sale of insurance by banks has raised concerns about mis-selling. This indirectly contributes to the cost of borrowing for customers. Banks should focus on core banking and not burden customers with unnecessary insurance products,” she said.

That statement put pressure on insurance stocks, especially those that rely heavily on bancassurance – the distribution of insurance through banks.

SBI Life Insurance is likely to face the most scrutiny as it receives 60% of its annualized premium equivalent (APE) from bancassurance, primarily through State Bank of India (SBI), which is controlled by the government.

Analysts believe that stricter regulations or a shift in focus for public sector banks could significantly affect SBI Life’s business.

On the other hand, HDFC Life Insurance gets 65% of its APE from bancassurance, mostly through HDFC Bank. Max Life Insurance relies on bancassurance for 52% of its business, with Axis Bank being its largest distributor.

ICICI Prudential Life Insurance relies less on bancassurance with only 29% of APE from this channel. ICICI Bank mainly sells term life policies which are low premium products.

LIC, the country’s largest insurer, has minimal exposure to bancassurance, with only 4% of its business coming from this channel.

Debasish Panda, Chairman, Insurance Regulatory and Development Authority of India (IRDAI), emphasized the importance of trust in bancassurance channels.

Speaking at an SBI conclave, he said, “Banks are crucial to the insurance sector because of the trust they command. However, issues such as mis-selling and forced selling through bancassurance must be addressed to maintain customer confidence.”

Adding to the market uncertainty, the central government plans to introduce significant reforms in the the insurance sectorincluding enabling 100% foreign direct investment (FDI) and relaxing restrictions on insurance agents.