PB Fintech, the parent company of Policybazaar, is considering a major strategic shift into insurance manufacturing as proposed changes to insurance-distribution commissions threaten to reduce the economics of its core business. Group CEO and co-founder Yashish Dahiya said the company could explore obtaining an insurance-manufacturing licence over the longer term if the proposed regulatory framework significantly changes the economics of insurance distribution.
The development comes after the Insurance Regulatory and Development Authority of India (IRDAI) released a consultation paper proposing significant changes to commissions paid to insurance distributors across life, health and motor insurance. The proposals have triggered a sharp market reaction, with PB Fintech shares falling 36% on September 24, wiping more than ₹31,000 crore from its market capitalisation in a single session.
Why PB Fintech Is Looking at Insurance Manufacturing
Policybazaar’s core business is based on distributing insurance policies from multiple insurers rather than manufacturing the policies itself. The platform earns revenue through commissions and other income associated with policies sold through its distribution network.
The proposed regulatory changes could materially reduce those commission rates. That has prompted PB Fintech to examine whether it should eventually participate further up the insurance value chain by creating, underwriting and selling its own insurance products.
Dahiya said the company could consider an insurance-manufacturing entity because lower distributor commissions could change the economics of the existing model. However, the proposal is not yet a board-approved decision, and PB Fintech has not announced that it will immediately apply for a manufacturing licence.
For now, the company is focused on understanding the final regulatory framework and adjusting its existing business accordingly.
IRDAI’s Proposed Commission Overhaul
The immediate trigger is IRDAI’s consultation paper on insurance distribution reforms.
The regulator has proposed bringing back product-specific commission limits after the earlier commission caps were removed in 2023. The proposed framework would determine permissible commissions based on factors including the insurance segment, distribution channel, product complexity and the effort required to sell and service a policy.
Among the proposals reported from the consultation paper are lower commission limits for several categories.
For health insurance, proposed first-year distributor commissions could be capped in the 15%–20% range, while renewal and portability-related commissions could be limited to around 5%–10%.
For motor insurance, proposed commission limits for personal-accident-related coverage are in the 5%–10% range. Life-insurance first-year commissions would also face product- and policy-tenure-based limits, ranging from roughly 5% to 20%. Loan-linked insurance distribution payouts are proposed to be capped at 2%–5%, depending on the product.
These are still proposals, not final regulations. IRDAI has invited stakeholder feedback until October 25, meaning the eventual rules could change.
Non-Life Insurance Could Face the Biggest Impact
PB Fintech has indicated that the proposed changes would affect its businesses differently.
The company said its insurance business is broadly split between life and non-life insurance, with the expected impact concentrated on the non-life side. Dahiya said general-insurance commissions could potentially fall to around one-third to 40% of current levels under the proposed framework, describing the potential revenue impact as significant.
This is particularly relevant for Policybazaar because health and motor insurance are major parts of India’s digital insurance-distribution market.
Analysts have also highlighted the company’s sensitivity to commission rates. Jefferies estimated that a 10% reduction in new-business commission rates could translate into a 10%–12% decline in earnings for distributors such as PB Fintech, while Business Standard reported estimates that proposed changes could reduce commissions substantially across health, term and motor insurance.
PB Fintech Plans Cost Controls and Slower Hiring
The company is not relying solely on a possible move into insurance manufacturing.
Dahiya said PB Fintech would also reassess spending across areas including digital marketing, branding, sales and customer support as it adjusts to the new regulatory environment. The company has also indicated that hiring could slow.
Importantly, PB Fintech said it does not plan mass layoffs. Reuters reported that the company had hired around 6,000 people during the first half of the year, while Dahiya said it might have hired closer to 2,000 had the proposed regulatory changes been known earlier.
The strategy therefore appears to involve moderating the pace of expansion rather than abruptly cutting the workforce.
New Revenue Opportunities Could Emerge
PB Fintech is also looking at ways to generate revenue beyond traditional insurance-distribution commissions.
According to Reuters, the company could potentially monetise its existing hospital and garage networks, as well as technology, underwriting and claims-related capabilities.
This could become increasingly important if the regulator’s final framework limits the amount distributors can earn from policy sales.
The company has already built a large technology and distribution ecosystem around Policybazaar. Using those capabilities to provide additional services could allow PB Fintech to diversify its revenue base rather than depending overwhelmingly on commissions.
What Insurance Manufacturing Would Mean
Moving into insurance manufacturing would represent a major change in PB Fintech’s business model.
As a distributor, Policybazaar can offer products from multiple insurers and earn distribution income without taking direct underwriting risk. An insurer, by contrast, designs products, prices risks, collects premiums and ultimately bears responsibility for claims.
That means manufacturing could potentially provide a new source of economics, but it would also involve greater capital requirements, regulatory oversight, underwriting responsibilities and insurance risk.
For that reason, PB Fintech has presented manufacturing as a potential longer-term strategic option rather than an immediate replacement for Policybazaar’s existing marketplace model.
Investors React Sharply to the Regulatory Threat
The proposed reforms produced an immediate reaction in the stock market.
PB Fintech shares plunged 36% on September 24 to close at around ₹1,207, according to Economic Times, marking the company’s biggest single-day fall since its listing in November 2021. More than ₹31,426 crore was wiped from its market capitalisation during the selloff.
The market reaction reflects concerns that lower commission rates could directly affect the revenue and profitability of insurance distributors.
Other financial companies with significant insurance-distribution income also came under pressure. Reuters reported that banks and non-bank lenders with substantial insurance distribution exposure were affected as investors reassessed the potential impact of the proposed rules.
FY2028 Could Become the Key Adjustment Period
PB Fintech has indicated that the proposed changes are not expected to have a meaningful impact on FY2027, but the following financial year could become more challenging if the new regulations are implemented.
Reuters reported that Dahiya described FY2028 as a potential period of “challenges and discovery”, as the company recalibrates its business model under the new regulatory environment.
That gives PB Fintech time to evaluate alternative revenue streams, control expenses and determine whether insurance manufacturing makes strategic sense.
The final regulatory framework will be critical. Since the current proposals are still under consultation, the eventual commission structure could differ from the draft.
Policybazaar Faces a Major Strategic Turning Point
PB Fintech’s consideration of insurance manufacturing highlights how significantly the proposed IRDAI reforms could reshape India’s insurance-distribution industry.
Policybazaar has built its business around helping customers compare and purchase insurance products from multiple insurers. If distributor commissions are substantially reduced, the company may need to rely more heavily on scale, technology, additional services and potentially manufacturing its own insurance products.
For now, insurance manufacturing remains a strategic possibility rather than a confirmed business launch. The next major milestone will be IRDAI’s consultation process and the final rules that emerge after stakeholder feedback.
The outcome could determine whether PB Fintech continues primarily as a large digital insurance distributor or gradually evolves into a broader insurance platform combining distribution, technology, services and potentially insurance manufacturing.
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