We missed this earlier: The proposed commission caps by the Insurance Regulatory and Development Authority of India (IRDAI) could erase 30% of PB Fintech’s revenue, co-founder and Group CEO Yashish Dahiya said.
PB Fintech, which runs the insurance marketplace Policybazaar, said its non-life insurance business is likely to take the biggest hit. The management expects a 33-40% decline in revenue in this segment if general insurance commissions reduce by around 60%. During an analyst call on September 24, Dahiya said:
“We think life insurance should not have a major impact. But in terms of general insurance, revenue could decline between one-third to 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%.”
Lower insurance commissions could lead to higher volumes: With most general insurance partners, PB Fintech operates on a combined operating ratio model. The management explained that if claims ratios or commissions decline, insurers can pass on the benefit to customers through lower pricing.
With a price elasticity of at least 1, the management expects 15–20% volume growth to partially offset revenue losses. Additionally, the company is exploring service revenues from activities it currently performs without charging, such as managing garage networks (PB Garages), hospital networks (PB Care+), and reinsurance brokerage services.
Entry into insurance manufacturing: PB Fintech argues that it has spent years building a business around what it calls quality insurance customers and the value it has created through that quality should be recognised.
“It becomes a little harder for me to justify not having a manufacturing entity of my own, because this somewhat takes away the trust in the fact that distributors would be rewarded for the quality of business they create. See, we have worked 18 years to create good quality business. Today, if we had created bad quality business or good quality business, if we’re going to get paid exactly the same for both, to an extent, the joke is on us,” Dahiya said.
In the past, PB Fintech didn’t feel the need to become a insurance manufacturer because it could work with its partners on a combined operating ratio basis.
We are operating at a combined operating ratio of 93% in health. For Rs 30 of capital, with Rs 5 of interest income on that and Rs 7, that is Rs 12 on Rs 30, that’s 40% return on equity. If you reinsure that, you can today reinsure commodity at 20%. And let’s say you reinsure 50% of that, then on your 50%, you can make 60% return on equity.
So, I think we are giving a very profitable business. If somebody expects it to be more profitable than that, somebody expects it to be 100% return on equity, I think that’s an unfair expectation. And then that is where you get forced to become a manufacturer.
The management said it could consider obtaining an insurance manufacturing licence if changes to insurance commissions alter the economics of its business and the company or its customers are unable the profit from its distribution model.
No mass layoffs: While its non-life business is expected to come under strain, PB Fintech does not plan on executing mass layoffs. However, it did say hiring would slow down. Sarbvir Singh, CEO of Policybazaar, said:
We are going to make no knee-jerk decisions, there will be no mass layoffs of any kind, we run the company for long-term growth, and we will calibrate that growth to the new reality, but at no point are we going to make decisions which will hurt our colleagues in any sort of unfair way.
According to PB Fintech, contact centre costs account for nearly 20% of its revenue and the top 50% of sales people contribute to 80% of sales.
In the first half of the year, PB Fintech hired around 6,000 people. The management argued that had the draft been released earlier, that number may have been closer to 2,000.
MGA framework and industry-wide consultation: The management said the draft is a consultation paper, not final regulations, and that it affects all distributors and insurers. It plans to ask the regulator to approve the Managing General Agent (MGA) framework. Dahiya said:
“We also hope the Act had provided a provision for the MGA, so we will also represent to the regulator and try to see if, along with these regulations, they can also consider approving the MGA, which should address this problem of quality and, thus, allow us to be rewarded for the better quality of business we do.”
Why this matters: The IRDAI consultation paper, titled “Recalibrating Economics of Insurance Distribution,” proposes a five-year plan to bring life insurers’ expenses of management (EoM) down to 12.5% and general insurers’ to 20%. First-year commissions on individual health policies are proposed to be capped at 15% for distribution entities, down from the prevailing 30%. But renewal commissions face an even steeper cut to 5–10%. For an industry where total distributor remuneration rose 125% between FY23 and FY25, these caps represent a structural reset.
Policybazaar’s fresh retail health insurance market share has grown nearly fourfold, from approximately 4.5% in FY22 to an estimated 18–20% in FY26, the company said in its annual report. This makes PB Fintech one of the most exposed companies under the new proposals, with its stock dropping over 30% following the release of the draft. The company acknowledged that a 10% cut in commissions could lead to a 12% drop in earnings.
The regulatory push comes amid broader concerns about mis-selling and dark patterns on digital platforms. IRDAI has proposed a claw back mechanism for misselling and a ban on practices it classifies as “dark patterns”. For a platform like Policybazaar, which relies on digital marketing and lead conversion, these provisions introduce additional compliance burdens.
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