Insurance distribution platform PB Fintech is bracing for a structural reset in its business model as the Insurance Regulatory and Development Authority of India (IRDAI) moves to reimpose tighter caps on insurance commissions and a phased reduction in insurers’ expenses.
During the company’s Q2 FY27 post-earnings call, chairman and group CEO Yashish Dahiya said that while the insurtech company fully supports the regulator’s goal of reducing mis-selling and lowering prices, lower commission payouts are inevitable once the proposed changes take effect.
“Lower distribution payouts will reduce our insurance distribution revenue, for sure,” Dahiya said.
On a separate analysts’ call in September, he had warned that the proposed commission caps could erase up to 30% of PB Fintech’s revenue.
“We think life insurance should not have a major impact. But in terms of general insurance, revenue could decline between one-third and 40% of what we have today. That’s a very serious impact on revenue.
See, if you look at our overall revenue, let us say we have Rs 100 crore of revenue. Of our core business, roughly half comes from general insurance, half comes from life insurance, let’s say broadly. And let us say our general insurance gets compressed by 60%. Let’s go with that. So, our total revenue will get compressed by 30%,” Dahiya said then.
The remarks follow IRDAI’s proposal to bring back product-level commission caps on insurance distribution. In its consultation paper ‘Recalibrating Economics of Insurance Distribution,’ the regulator argued that commission payouts have grown disproportionately since caps were removed in 2023.
According to figures shared by IRDAI, distributor remuneration in the life insurance corporate agency channel grew 125% between FY23 and FY25, compared with a 28% rise in new business premium. Distributor remuneration now accounts for nearly 27% of first-year premiums, with rewards and incentives adding another 30–60% over base commission.
The proposed framework links commissions to the complexity of the insurance product and effort required to sell them. The regulator has also called for stronger safeguards against mis-selling, including a ban on compulsory bundling of insurance with loans and credit, except where an acceptable package serves policyholders’ interests.
PB Fintech to explore non-insurance services in its ‘entirety’
Under the current draft rules, Dahiya admitted that renewal profitability and fresh payouts from insurance distribution would be “extremely limited”. To offset the hit to its Net Present Value (NPV), PB Fintech plans to align its variable and marginal acquisition costs with lower expected payouts. It will also expand non-insurance and ecosystem offerings such as PB Pay and PB Care+ once final regulations are notified.
When Policybazaar sells a policy (such as health, term life, or motor insurance), it earns an upfront commission in the first year and smaller trailing or renewal commissions in subsequent years. The NPV calculates the present value of all these future expected cash inflows minus the upfront customer acquisition and underwriting or servicing costs.
With insurance distribution economics facing severe strain, PB Fintech may also begin charging for services it currently provides for free, including claims assistance.
“We will see, whatever the regulation permits. The regulation has made an explicit mention of non-insurance services being allowed. We will explore those, in their entirety,” Dahiya said.
Formal talks underway on insurance manufacturing, acquisitions ruled out
While Dahiya had previously floated the idea of entering insurance manufacturing to capture value, he clarified on the Q2 earnings call that taking minority stakes in existing insurers is off the table. Instead, PB Fintech is already in formal discussions with IRDAI to seek regulatory guidance on its broader strategic options, Dahiya said, without sharing details as the matter is subject to regulatory judgement.
Dahiya stressed that PB Fintech has operated “with the heart of a manufacturer” from day one by prioritising insurers’ combined operating ratios (COR) and claims ratios over raw sales volume. He noted that discussions with insurance partners will increasingly center around this COR model, which already delivers a 30–40% return on equity to partners. He further said that if distributor take rates drop sharply, customer benefits may need to increase to keep insurer profitability at fair levels.
Management also pushed back against the notion that Policybazaar is merely a high-commission intermediary. Joint Group CEO Sarbvir Singh noted that Policybazaar performs “at least three and a half” of the four core insurance functions: creating awareness, helping customers choose policies, managing sales and claims support, and assisting with risk management and underwriting.
“If you look at a company’s Expenses of Management (EoM), what do they have to do on Policybazaar’s business, over and above what Policybazaar has already done? The cost may be 1% to 3% at most,” Dahiya noted, adding that Policybazaar also helps insurers achieve lower claims ratios through better risk selection.
The defense comes after IRDAI proposed capping insurers’ EoM at 12.5% of premiums for life insurers and 20% of gross direct premium income (GDPI) for general insurers over five years. EoM includes operating expenses of insurance business including commission, remuneration/brokerage, rewards to the insurance agents, intermediaries and insurance intermediaries.
Highlighting Policybazaar’s operational value, Dahiya cited internal performance metrics:
- Claims settlement: 97% of health claims for Policybazaar customers are settled, compared to the industry benchmark of 87%. Last year, 11,156 rejected claims worth Rs 185 crore were reopened and paid.
- Volume & satisfaction: In the first half of the current fiscal year, the platform supported roughly 1.25 lakh health claims and 80,000 motor claims, maintaining over 90% customer satisfaction.
- Persistency: 71% of its life policies remain in force at month 61, outperforming the 51% to 66% benchmark of large insurers.
Point-of-sale person business under question mark
Perhaps the biggest casualty of the proposed regulatory overhaul is PB Fintech’s offline agent network, PB Partners, which generated roughly Rs 700 crore in revenue during the quarter ended September 2026. Management revealed that the point-of-sale person (POSP) business is currently loss-making and warned its existing model may not survive the proposed rules.
A POSP is an IRDAI-certified insurance agent who sells pre-approved, simple insurance products directly to customers. The model was introduced in 2015 by the regulator to increase insurance penetration across the country.
Highlighting that the draft regulations propose paying open-architecture intermediaries less than closed-architecture channels, Dahiya questioned the viability of paying agent commissions in a segment dominated by motor insurance.
“Let’s look at the POSP business. We do make a loss there today. I think the way the regulations are, that entire business is a bit under a question mark because to an extent, it relies on being able to pay people,” Dahiya told analysts.
He added that the current regulatory structure “does not leave scope for POSP the way it is today,” noting that pivoting agents to sell mutual funds or non-insurance products is not an easy transition. Pointing to working capital strains, since PB Fintech pays POSP agents upfront before receiving payouts from insurers, Dahiya said the company is hoping the regulator grants sufficient transition time once the final rules are notified.
Regulatory scrutiny on lead collection and dark patterns
Bernstein analyst Manas Agrawal asked the management whether the way Policybazaar and other insurance aggregators collect personal data, including phone numbers, from customers is a dark pattern or not.
“So, on dark patterns, we and other players in the industry are engaging with the regulator, and there is increasing clarity on what the expectations are, and we are fully committed to aligning on those,” Dahiya responded.
His non-answer follows IRDAI’s proposal to restrict insurance platforms from demanding personal data (such as phone numbers or email addresses) merely to let users view basic policy details or quotes.
When pressed by Investec’s Nidhesh Jain on how much call-center-converted business could be lost under tighter lead norms, Dahiya declined to disclose figures, calling it “not prudent” while discussions are ongoing.
PB Fintech’s marketing expenses soar after IRDAI proposes phased reduction in costs
Even as the regulator pushes for lower distribution expenses across the sector, PB Fintech reported a sharp jump in selling and marketing expenses during the second quarter, driven by sluggish market demand compared to the post-GST rate-cut surge seen a year earlier.
While Dahiya noted that the company is shifting from an “all-in growth” mindset to a sharper focus on cost discipline—including using generative AI to boost advisor productivity by 15–20% and slowing down October hiring—management maintained that cutting brand-building ad spend is not an option.
“The biggest challenge in insurance is demand. See, everything else is manageable. The only thing that you can’t manage is demand. So, I think, we will have to spend money to keep the awareness to continue with the focus on building the categories. And, frankly speaking, I think it doesn’t impact just Policybazaar, I think it impacts the industry, because, when we advertise, it helps everyone, and I think that’s something that we will have to keep doing,” said Sarbvir Singh, joint group CEO at PB Fintech.
Dahiya echoed this stance, emphasising that while upper-end marginal acquisition costs will be trimmed if NPV drops, Policybazaar will not pull back on its core customer proposition.
“If at the marginal level, if your NPV was X, if at the marginal level you were operating at X in terms of cost. If your NPV becomes 0.5x, then your marginal level spend will be 0.5x. There is no reason why you will spend X for 0.5x of business, on a net present value basis,” Dahiya explained.
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