Policybazaar, Turtlemint Feel The Squeeze

IRDAI's draft on insurance distribution has sent shockwaves through India's listed insurance tech space. Policybazaar-parent PB Fintech lost about ₹31,500 Cr in market value in a single session, and Turtlemint crashed to its lower circuit. The proposed commission caps now pose an immediate threat to the core business of both.

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Riya, 27, wants to buy her first family-floater health cover on PolicyBazaar. But before she sees a single price, the app asks for her name, phone number and city.

Within minutes, her phone starts ringing. She settles on a plan with an annual premium of ₹20,000.

Riya never sees the other half of the transaction. In this case, the insurer, the one that Riya selected, pays Policybazaar a small commission from the ₹20,000 premium.

And of course, there could be other commissions involved such as renewal or lack of claims, but this is primarily the economic model behind digital insurance distribution. All that could change if the insurance regulator has its way. The Insurance Regulatory and Development Authority (IRDAI) released a consultation paper on September 23, looking to reintroduce commission caps on premia paid by first-time policy buyers and customers renewing policies.

And of course, there could be other commissions involved such as renewal or lack of claims, but this is primarily the economic model behind digital insurance distribution.

All that could change if the insurance regulator has its way. The Insurance Regulatory and Development Authority (IRDAI) released a consultation paper on September 23, looking to reintroduce commission caps on premia paid by first-time policy buyers and customers renewing policies.

While the likes of Policybazaar, Paytm, PhonePe and other insurance distributors have charged commissions from insurers as a percentage of the gross premia thus far, the IRDAI’s proposals could bring in commission caps across health, term (life) and motor insurance products.

For life insurers, total expenses of management policies would be capped at 12.5% of........

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