Lower commissions could push Policybazaar into insurance manufacturing: Yashish Dahiya

Mumbai | New Delhi: Policybazaar parent PB Fintech said the proposed changes to insurance distribution economics could make it harder to justify remaining solely a distributor and increase the attractiveness of entering insurance manufacturing, which would allow it to design, underwrite and sell policies. The company said it would wait for more regulatory clarity on the proposal.

"I never wanted to be in manufacturing, but I think now this (proposal) has almost forced us to (do that)," PB Fintech cofounder and group chairman Yashish Dahiya said during an investor call on Thursday.

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The company said lower distribution commissions could alter the economics of its existing model and make insurance manufacturing a more relevant strategic option. Under the commission framework proposed by the Insurance Regulatory Authority of India (Irdai), there would be product-level commission caps. In general insurance, the proposed first-year commission on individual health policies is 15% against the prevailing commission of around 30% for distribution entities and 20% for agents. Renewal and portability commissions are proposed to be capped at 5% and 10%, respectively. Dahiya termed the Irdai proposals "quite extreme".

PB Fintech's management said a distributor with a large customer base could have an advantage if it eventually entered manufacturing, as it would already have access to a sizeable distribution network. However, the company said the economics would need to work for both itself and its partners.