The insurance market experienced a sharp jolt on Thursday as investors scrambled to price in the sweeping changes proposed by the country’s insurance regulator.

Shares across the sector tumbled after the Insurance Regulatory and Development Authority of India (IRDAI) released a consultation paper aiming to overhaul the commission structure for insurers and distributors, sparking fears of a sharp contraction in industry earnings.

The hardest hit was PB Fintech, the parent company of digital aggregator Policybazaar. Its stock plummeted 36% in its worst single-day drop since listing, erasing more than Rs 31,000 crore in market value. The impact quickly spread to traditional players, with Max Financial Services, HDFC Life, and ICICI Prudential Life taking significant hits.

Beyond pure-play insurance firms, the broader financial sector also felt the pinch; 12 financial stocks collectively lost about Rs 1.58 lakh crore in market capitalisation during the trading session as investors re-evaluated the profit outlook for financial intermediaries.

At the heart of the panic is IRDAI’s plan to reinstate product- and channel-specific limits on commissions—a setup it had unwound only in 2023. Under the new proposal, payout structures would be tied to the specific product type, the distribution channel, and the actual effort involved in selling and servicing policies.

For life and general insurers, the proposal offers tighter oversight over operating expenses. For brokers and online aggregators, however, it represents a direct threat to revenue. Digital platforms like Policybazaar, which rely heavily on upfront distribution fees, look particularly vulnerable. Market analysts suggest that even a 10% cut in new-business commission rates could shave 10% to 12% off PB Fintech’s earnings.

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