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Should You Buy Insurance Stocks?

08 August 20236 mins read by Angel One
What do you think about insurance company stocks? Hold on as we explain insurance stocks for all stock lovers.
Should You Buy Insurance Stocks?
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What is an insurance stock?

According to the definition of insurance stock, a stock insurance company has capital contributed by investors who control its operation and reap any profit or incur any loss from its business. Until fairly recently, most insurance companies were mutual companies, owned by the policyholders. But demutualisation has converted these mutual companies into stock companies.

While buying insurance stocks, there are fundamental differences between the operation of life insurance, health insurance, and general insurance companies.

Since LIC India debuted in the Indian stock market, insurance stocks have renewed interest among investors. After adopting the open-door policy, the Indian market started allowing private insurance players in a previously 100 percent regulated industry. LIC India is the dominant industry player, along with several private insurance companies. These companies are listed on the bourses, and investors can buy and sell their stocks like ordinary shares.

Shareholders own a publicly traded insurance company, and its objective is to earn profit for them. The policyholders aren’t directly impacted by the profit or losses of the company.

There are three primary types of insurance companies – life insurance, health insurance providers and general insurers. Insurance stocks are available in all three categories.

How to invest in insurance stocks?

Historically insurance companies were mutual companies owned by policyholders for the benefit of policyholders. But in recent years, several insurance companies were converted into stock companies through demutualisation.

Insurance companies have unique circumstances, which makes their evaluation different from other companies. They have a set of future liabilities, meaning they should invest their capital conservatively to have a ready reserve of liquid assets to settle any claim. The life insurance companies must invest following the government’s regulation determining asset valuation reserve (AVR), meaning these companies have less financial leverage.

Analysis of the life insurance industry

There are five listed life insurance companies – HDFC Life Insurance, ICICI Prudential Life, SBI Life Insurance, MAX Financial Service, and Life Insurance Corporation. LIC is the most recently listed life insurer.

Life insurance companies are experiencing a high claim settlement rate due to COVID-19. Despite that, there was a significant rise in the business in FY22. According to a report by CARE Edge, the industry will grow at around 12-14 percent in the next three to five years. Life insurance companies’ total first-year premium collection grew from Rs 12,900 crores to Rs 24,480 crore in May 2022, almost double the previous year’s same month’s premium collection. The private life insurance players have managed to grow at 114 percent in May 2022.

What are the reasons to consider insurance stocks for your portfolio?

  • There is a substantial rise in awareness regarding life insurance. 
  • Demand for annuity plans and protection plans is growing. 
  • Despite high claim settlement rates, the balance sheets of life insurance companies have grown significantly in FY2
  • Recently IRDA has approved life insurers to introduce new products without its approval, which is likely to boost their ability to target audiences.
  • Soon life insurance companies will be allowed to sell health insurance products as well.

Top insurance stocks in 2022

HDFC Life Insurance: HDFC Life offers a range of individual and group life insurance companies. It is a large-cap company with a market capitalisation of Rs 113,424.54 crore.

Before investing, get the live updates on HDFC Life Insurance share price.

SBI Life Insurance: The India-based life insurance company is a large cap firm with a market capitalisation of Rs 127,050.80 crore. They offer a range of individual, savings, protection, wealth creation, and group plans.

Track SBI Life Insurance share price on Angel One’s website.

LIC: The Life Insurance Corporation of India was the only PSU life insurer with the largest market share. LIC is a key player in the domain, with more than 250 million individual policyholders.

LIC IPO shares were listed on the stock exchange on May 17, 2022.

Do you want to invest in LIC? Follow LIC share price.

ICICI Insurance: ICICI Prudential is the life insurance company, while ICICI Lombard is the general insurer. Together they offer a range of life and general insurance products.

Track ICICI Pru share price and ICICI Lombard share price.


Although the life insurance companies were underperformers during the last few years in NIFTY, the industry has performed well, and there are robust predictions for the next five years. You can select life insurance or health insurance stocks to diversify your portfolio.

To invest in insurance stocks, you will need a Demat account. Go ahead and open a free Demat account with Angel One.

Disclaimer – This blog is exclusively for educational purposes. The securities quoted are exemplary and are not recommendatory.

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