PB Fintech Considers Insurance Manufacturing Amidst IRDAI Commission Cut Proposals

PB Fintech, the Indian insurtech company operating the Policybazaar platform, is considering establishing its own insurance manufacturing business. This move comes in response to proposed significant reductions in insurance agent commissions by the Insurance Regulatory and Development Authority of India (IRDAI), which the company estimates could reduce its revenue by up to 30 percent.

The company's business is currently split evenly between life and non-life insurance, with the latter segment expected to be most affected by the proposed changes. Yashish Dahiya, PB Fintech's co-founder and Group CEO, stated during an analyst call that revenue from general insurance could decline by one-third to 40 percent due to these commission caps.

To mitigate potential revenue losses, PB Fintech anticipates that lower commissions could lead to more competitive pricing for customers, potentially driving a 15-20% increase in sales volumes. The company is also exploring new revenue streams from services such as managing garage and hospital networks, as well as reinsurance brokerage.

Dahiya expressed that the company's 18 years of effort in building a quality customer base and creating value should be recognized. Given that the proposed changes may reduce incentives for distributors to be rewarded for business quality, PB Fintech sees justification for considering its own manufacturing arm. The company also plans to advocate for the approval of the Managing General Agent (MGA) framework to the regulator.

The IRDAI's proposals aim to reduce distribution costs across the insurance sector, impacting all players. While PB Fintech foresees challenges, it has stated it does not plan mass layoffs, though hiring will slow down. The company's growing market share in retail health insurance makes it particularly exposed to these regulatory shifts.