Policybazaar, Turtlemint Feel The Squeeze

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.

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 premium within five years, general insurers’ at 20%, as against 30% earlier.

In addition, IRDAI has also taken note of the practice of distributors seeking personal details of prospective customers before revealing the relevant policies, their terms and pricing. IRDAI called this a dark pattern on insurance apps along with other practices which it labelled mis-selling.

The regulator’s rationale is that there has been a whopping jump of payouts to distributors between FY23 and FY25 to the tune of 125%, whereas new business premiums only rose by 28% in the same period. The value of commissions more than doubled from ₹48,000 Cr in FY21 to ₹1.08 Lakh Cr in FY25. 

Thus, the regulator is of the opinion that commissions and payouts to distributors have outpaced premium growth, which has created a high-cost, commission-led insurance model that is not sustainable. 

Policybazaar’s Tough Week

 When it comes to individual companies, PolicyBazaar’s net profit nearly doubled YoY to ₹162.9 Cr in the June quarter (Q1 FY27) from ₹84.7 Cr in the same quarter last year.

Operating revenue also jumped 40% YoY to ₹1,888.3 Cr in the quarter under review from ₹1,348 Cr in Q1 FY26

In Q1 FY27, Policybazaar parent PB Fintech said the blended take-rate (average commission in a given period) on the core online insurance was 18.5%.

If implemented, the IRDAI commission caps would dent the revenue severely. Brokerage Jefferies estimates that PolicyBazaar’s commissions on new health cover could likely see a 33%-50% drop.

Analysts have framed these changes as a long-term benefit to the insurance industry, because insurers can pass on the savings from commission to customers and this could bring premiums down across the industry. This should ideally bring more individuals into the insurance net.

On the other hand, Policybazaar, Turtlemint and the likes are wary of any changes to the existing model. On an analyst call on Thursday, Policybazaar said it earns less than an insurance agent on the same policy. The management was responding to shareholders after the PB Fintech stock plummeted by 34-36% and hit its 52-week lows,

PB Fintech said the immediate impact from the proposed IRDAI guidelines ”is quite extreme” but it also said that the stock erosion is overblown. PB Fintech’s life and non-life insurance business is split equally (50:50) in terms of revenue, and it expects more impact on the non-life insurance business from the proposed changes.

The IRDAI is particularly going after commissions on renewals. PB Fintech’s renewal revenue hit ₹1,003 Cr in Q1 FY27, up 55% YoY and this is its highest-margin revenue stream. Notably, health insurance was its fastest-growing product, with new premium collections up 59% YoY in Q1 FY27.

The draft guidelines essentially hit the growth engine of Policybazaar. The management, however, said it is not yet clear whether the caps would apply to existing policies or only new ones.

The capping of commissions would most likely hit the company’s bottomline immediately.

According to the management commentary, the company sees its life insurance products business to be more resilient whereas its non-life business could be down by 25% to 33%.

On the brighter side, PB Fintech’s management expects volumes to rise 15–20% if general insurance commissions fall 60%, which would soften the hit. But that depends on insurers passing the savings on to customers, which management wants IRDAI to ensure with further regulation.

What The Street Is Saying

PB Fintech closed Thursday down 35.98% at ₹1,210 on the BSE, at its lower price band, with its market cap down to ₹55,993 Cr. This was its steepest single-day fall since listing. Turtlemint closed at its 20% lower circuit at ₹109.04.

The two new-age stocks and other legacy insurance players bled heaviest on Thursday with investors continuing to exit their positions even on Friday, two days after IRDAI’s announcement.

How the tables have turned. Only a month ago, Bernstein was among PB Fintech’s biggest bulls. In its August note, Bernstein gave an outperform rating to PB with a ₹2,310 target price.

Now, it’s calling the proposed commission cuts far more severe than expected, saying PB Fintech will be the most impacted. Bernstein has concerns for PB’s health and motor insurance unit economics, and estimates that current call centre costs cannot hold up at these take-rates. 

Jefferies estimated that a 10% cut in new business commission rates means a 10–12% fall in earnings for PB Fintech, Turtlemint and other insurance distributors. Similarly, Citi said that distribution economics could compress 70–90% in several high-margin categories. Macquarie, HSBC and Emkay all flagged PB Fintech as among the most exposed.

PB Fintech claimed there will be no impact in the ongoing financial year, but expects FY28 to be a volatile fiscal year. It aims to get earnings back on track by FY29, shifting from “passionate growth” to “rational growth”.

While brokerages focused on PB Fintech, Turtlemint might be even worse off.

The major challenge surrounding Turtlemint is its revenue concentration with general insurance contributing to nearly 90% of its revenues in Q1 FY27

With the draft guidelines suggesting no commissions for distribution on new-vehicle third party insurance and proposing a capping at 5% on own-damage policies, the core revenue base of Turtlemint will experience a major hit.

Additionally, unlike Policybazaar, Turtlemint doesn’t sell to customers directly.

Its partners sell through the Turtlemint app, with commissions being shared between Turtlemint and these partners. The acquisition and payment to these partners alone constituted 77.45% of total expenses before the IPO, and Turtlemint’s disclosures after listing are not clear on this expense.  

But with the commission pool potentially shrinking, Turtlemint’s very model is under threat. 

The Cushion For Go Digit And Acko

While stocks of insurance distributors fell, Go Digit stood to gain. The company’s stock gained 6.21% in the week even as PB Fintech and Turtlemint fell by over 30% each.   

Unlike Policybazaar and Turtlemint, Go Digit and Acko are not distributors but insurers and can actually sell policies directly to individuals, or through aggregators like PB Fintech, Paytm, PhonePe and other apps. 

For Go Digit, motor insurance constitutes a significant portion of its Gross Written Premium. Motor insurance reported a 5.3% YoY increase in net premium earned (NPE) to ₹1,510.1 Cr in Q1 FY27, up from ₹1,430 Cr in the corresponding quarter last year.

If the new guidelines are implemented, it is expected that like many insurers, Go Digit’s commission expenses will reduce substantially which would add to its profits, but it could lose out on some topline with the price of premiums potentially dropping.  

What could pose a big problem is their dependence on digital distributors channels which can impact the company in the long term, if distributors turn commission hungry and push policies from other insurers which have higher premiums in comparison to Go Digit or Acko, both of which compete on cost thanks to their tech-first approach.

Acko is aiming to list next year at a H1 2027 at a $2 Bn-$2.5 Bn valuation, and its insurance arm turned profitable in FY26. Although its pitch has always been direct selling, much of its growth has come through embedded partnerships on consumer apps, and brand-value payments that now count as commission. Acko also risks some impact on its business due to dependence on digital channels for policy distribution.

While the final comments on the suggested IRDAI regulations will come by October 25, 2026, most of the industry expects a pushback by the insurance distributors and insurers alike.

PB Fintech has stated that it will seriously consider becoming an insurer itself, and is exploring its own insurance and reinsurance products on the back of proposed changes in the distribution business.

That echoes PB Fintech chairman Yashish Dahiya’s earlier warning that hard caps is a potential existential threat to distributors. And soon this threat could be a reality. 

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[Edited By Nikhil Subramaniam]

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