PB Fintech, the parent company of Policybazaar, has said that the 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 the recent price and volume movement in its shares reflected overall market dynamics, sector-specific news flow and external market sentiment. It said it had no control over such market-driven fluctuations.
The clarification follows the Insurance Regulatory and Development Authority of India's (IRDAI) public consultation paper, “Recalibrating Economics of Insurance Distribution”, which proposes changes to the distribution expense structure and commission limits.
In the consultation paper floated on Wednesday last, the regulator proposed reducing insurers’ Expenses of Management (EoM) to 12.5% of premium for life insurers and 20% of gross direct premium income (GDPI) for general insurers over five years. The paper also proposes product-wise commission caps, with commissions on term insurance coming down 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 paper is currently at the consultation stage and is not a final regulatory order or directive. The company said the proposed limits, if implemented in their current form, may not fully reflect the existing operating and servicing costs of online insurance distribution.
Brokerage houses have estimated if the proposed changes in the insurance commission are implemented, it will hit PB Fintech’s revenue by 35-50% in a couple of years.
PB Fintech in the exchange filing said it is evaluating the impact of the proposed changes along with other industry stakeholders and will submit detailed feedback and representations to IRDAI and other relevant authorities within the consultation timeline.
It reiterated that it would inform the stock exchanges of any material development as required under applicable laws.