However, even if these stocks offer potential, there are some downside risks that investors should be cognizant of. For one, as the reinsurers have started increasing their pricing, insurance companies, too, may hike their price to customers. However, under the current conditions, the degree to which price hikes can be implemented is questionable.
“Weak retail sentiment, on the back of Covid-19, and focus on growing the high-yielding protection segment (individual protection and credit life insurance), will likely deter insurance companies from raising protection pricing sharply over the next few quarters,” say analysts at Kotak Institutional Equities.
The brokerage also warns of a potential fall in persistency ratios because of a shift in consumer preferences and high unit-linked insurance policies surrenders. Consequently, there may be some immediate-term pressure on pricing for insurance companies. For AMCs, one needs to be watchful of redemptions and persistency of systemic investment plans.
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