Daijiworld Media Network - Mumbai
Mumbai, Sep 28: PB Fintech, the parent company of Policybazaar, has said proposed changes to insurance distribution expenses and commission limits could affect the economics of online insurance distribution.
In a clarification to the stock exchanges on September 27, the company said recent movements in its share price and trading volume reflected broader market conditions, sector-specific news flow and external market sentiment, over which it had no control.
The clarification came after the Insurance Regulatory and Development Authority of India (IRDAI) issued a consultation paper titled “Recalibrating Economics of Insurance Distribution”, proposing changes to insurers' distribution expenses and commission structures.
Under the proposal, insurers' Expenses of Management (EoM) would be reduced over five years to 12.5% of premium for life insurers and 20% of gross direct premium income (GDPI) for general insurers. The regulator has also proposed product-wise commission caps.
The proposed caps include reducing commissions on term insurance from 51% to 25-30%, health insurance from 24% to 15-20%, motor insurance from 26% to 0-15%, and savings insurance plans from 14-37% to 5-25%.
PB Fintech said the proposals are currently at the consultation stage and do not constitute a final regulatory order or directive. It said the proposed limits, if implemented in their current form, may not fully account for the existing operating and servicing costs involved in online insurance distribution.
Brokerages have warned that the proposed changes could significantly affect PB Fintech's revenue and earnings. Estimates vary depending on the assumptions used, with analysts assessing risks ranging from a substantial impact on revenue to a 46% potential earnings risk.
PB Fintech said it was evaluating the potential impact of the proposals in consultation with other industry stakeholders. The company will submit detailed feedback and representations to IRDAI and other relevant authorities within the consultation period.
It also reiterated that it would inform the stock exchanges of any material developments as required under applicable laws.