Insurance stocks are in the spotlight after the Insurance Regulatory and Development Authority of India (IRDAI) proposed changes to the way insurers and distributors can manage expenses and commissions.
In the intraday trade, PB Fintech shares fell 32%, while Max Financial Services declined 12%. Bajaj Finance and HDFC Life Insurance dropped 6% each, while Bajaj Finserv slipped 4% among other stocks.
What if the price of your insurance policy depended on how much the person selling it earns? That question sits at the heart of a new proposal that has put insurance stocks in the spotlight today.
The global brokerage house Jefferies has given its outlook on the proposed changes and believes the impact could be different for insurers and distributors. According to the brokerage report, distributors such as PB Fintech and Turtlemint could face greater pressure from lower commission rates, while some insurers may see a relatively limited impact.
Which part of the industry faces the bigger risk? Let’s take a look –
According to the brokerage report by Jefferies, distributors are likely to face the biggest impact from the proposed changes, while the effect on insurers could be more mixed.
The proposed framework seeks to change expense of management (EOM) limits and commission structures across life, health and motor insurance. The changes include lower commissions for some distribution channels and a stronger link between renewal commissions and customer persistency in life insurance.
New business commissions for health and term insurance could be reduced significantly, while commissions for new motor own-damage policies could also come down.
Jefferies estimates that a 10% reduction in new business commission rates could translate into a 10-12% decline in earnings for distributors such as PB Fintech and Turtlemint.
The brokerage report also pointed out that insurers may have limited room to offset the impact by increasing other payments to distributors because overall EOM limits would still apply.
The picture is different for insurance companies. According to Jefferies report, SBI Life Insurance and Life Insurance Corporation of India (LIC) appear relatively comfortable under the proposed framework, with EOM ratios of 10.6% and 11.9%, respectively.
Also, some insurers could face near-term growth challenges if lower commissions affect distribution.
For non-life insurers, the impact could be more visible in motor insurance. Jefferies expects Go Digit and ICICI Lombard General Insurance to face some risk from lower commissions in motor own-damage insurance.
At the same time, there could be a longer-term benefit if lower commissions reduce competition in the motor insurance market.
Health insurance companies could see different outcomes depending on their distribution models.
According to the brokerage report, Star Health and Allied Insurance could be relatively better placed because around 85% of its business comes through its agency network. Jefferies also expects lower renewal commissions to provide some support despite the proposed EOM limits.
Niva Bupa Health Insurance, meanwhile, could face challenges because of its exposure to bank-led group health insurance business.
The proposals are not final yet. IRDAI has invited feedback on the consultation paper until October 25, 2026, with implementation proposed from financial year 2027-28 (FY28).
Jefferies believes the possibility of a major rollback is limited, as IRDAI has also published supporting data alongside the consultation paper.
According to the brokerage report, investor concerns could weigh on both insurers and distributors if the proposals are implemented.
However, Jefferies sees any correction in SBI Life, Star Health and ICICI Lombard as an opportunity to buy, citing their relatively limited exposure to the proposed changes, potential for market-share gains and scope for margin expansion.
The brokerage report added, “We see any correction as an opportunity to Buy SBI Life, Star Health and ICICIGI, considering limited risks from the consultation paper, share gain opportunities, scope to expand margins and attractive valuations.”