For insurance distributors, the commission earned on every policy is central to their business model. It determines how much they can spend to acquire customers, the products they prioritise, and the economics of their partnerships with insurers.

The Insurance Regulatory and Development Authority of India (IRDAI) has proposed a sweeping overhaul of the insurance distribution ecosystem in its consultation paper ‘Recalibrating Economics Of Insurance Distribution’.

The proposals come more than three years after IRDAI removed product-wise commission caps in April 2023 and shifted to an expenses of management (EoM) framework, giving insurers greater flexibility in determining distributor payouts.

However, the regulator now believes that commissions and other distributor payments have risen disproportionately and is proposing to bring back product-level ceilings, tighten insurers’ overall expense limits, and scrutinise indirect incentives.

The scale of the potential disruption was reflected in the stock market today. Shares of Policybazaar parent PB Fintech ended the session 35.98% lower at ₹1,210 apiece on the BSE.

Turtlemint shares remained locked at the 20% lower circuit, ending at ₹109.10 apiece. The stock also touched its lowest level since the insurtech company’s listing in June. HDFC Life Insurance Company’s shares plunged 6.13%, while those of ICICI Prudential Life Insurance fell 4.23%.

Brokerages said the proposed limits could sharply compress the economics of insurance distribution, particularly in categories where prevailing payouts are far above the suggested caps. For insurtechs and other insurance distributors, the changes could affect revenue from health, motor, and life insurance policies. They may also force platforms to rethink customer acquisition expenditure, insurer partnerships, sales incentives, and product prioritisation.

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