Mumbai: PB Fintech, the parent company of Policybazaar, is recalibrating its business strategy after proposed changes to insurance distribution economics by the Insurance Regulatory and Development Authority of India (IRDAI). The company plans to reduce marketing expenditure, rationalise costs and focus on higher volumes as it assesses the impact of the proposed regulatory changes.
Shares of PB Fintech plunged as much as 34% on Thursday, hitting a fresh 52-week low, as investors assessed the potential impact of the proposed changes on distributor economics. The company’s management subsequently held an analyst call to explain how it expects to respond to the evolving regulatory environment.
The IRDAI consultation paper proposes changes to commissions, expenses and distribution practices in the insurance sector. PB Fintech said the impact is expected to vary across its businesses, with general insurance likely to face greater pressure than life insurance.
General insurance likely to see bigger impact
PB Fintech co-founder and CEO Yashish Dahiya said the proposed changes are not expected to have a significant impact on the company’s life insurance business. However, its general insurance operations could experience a larger impact from the new framework.
The company expects higher business volumes to partly offset the pressure from changes in distribution economics. According to Dahiya, cost benefits could potentially be passed through to customers and contribute to volume expansion.
PB Fintech expects volumes to grow by around 15–20% as the business adjusts to the new economics. The management indicated that increased volumes could help compensate for some of the pressure on margins and revenue per policy.
No mass layoffs planned
Policybazaar CEO Sarbvir Singh said the company does not plan mass layoffs despite the expected changes in its cost structure.
Instead, PB Fintech intends to recalibrate expenses, with marketing expenditure among the areas where spending could be reduced. The company believes that there is scope to rationalise costs while maintaining its ability to support business growth.
Dahiya said the contact centre contributes around 20% of revenue and that cost efficiencies could provide additional room for volume expansion.
The approach indicates that the company is looking to manage the transition through cost optimisation rather than a broad workforce reduction.
Company highlights service revenues
PB Fintech’s management also emphasised that the company should not be viewed only as an insurance distributor.
According to Dahiya, the company earns service revenues from its insurance partners in addition to its distribution activities. Management also highlighted customer service and claims management as important areas where the company intends to strengthen its offering.
Dahiya said the industry’s challenges extend beyond distribution and include customer service and claims handling. The company’s proposed managing general agent (MGA) approach is intended to support what management described as more responsible and quality-focused distribution.
This could allow PB Fintech to build additional value around its existing insurance ecosystem rather than relying solely on commissions from policy distribution.
PoSP impact remains uncertain
Another area where the company is still assessing the regulatory implications is its Point of Sales Person, or PoSP, business.
The PoSP operation is currently classified within the agency business, but PB Fintech has not yet determined the full impact of the proposed regulatory framework on this segment.
Dahiya said distributors had not been consulted at this stage. Sarbvir Singh also noted that the proposed commission levels could be less attractive for larger agents, while agency-related costs remain significantly higher than those associated with PoSP operations.
The eventual treatment of PoSPs under the final regulations could therefore be important for the company’s distribution strategy and cost structure.
Focus remains on core business
PB Fintech’s management said capital allocation will continue to focus on protecting the company’s core position in the insurance market.
Improving claims management and customer service is expected to remain a key part of this strategy. The company believes stronger service capabilities can help differentiate its platform as insurance distribution economics change.
Rather than making an immediate large-scale shift in capital allocation, management intends to focus resources on strengthening its existing business and adapting to the proposed regulatory framework.
FY27 impact expected to be limited
PB Fintech management said it does not expect the proposed changes to have an impact on its FY27 results. However, the company acknowledged that the broader transition could require changes to its business model.
The company expects the adjustment to the new insurance distribution economics to be more relevant beyond the immediate financial year. According to the report, FY28 could be a volatile transition year as the business adapts to the new framework.
The final impact will depend on the provisions eventually notified by IRDAI, as the current proposals are part of a consultation process and could change following stakeholder feedback.
PB Fintech faces a changing insurance distribution landscape
The proposed IRDAI changes have introduced uncertainty for insurance distributors, prompting PB Fintech to reassess its cost structure, marketing expenditure and volume strategy.
Management’s response includes lower marketing spending, cost rationalisation and an increased focus on volumes. At the same time, the company plans to maintain its core operations and invest in customer service and claims management.
The extent to which higher volumes and lower costs can offset pressure on distributor economics will depend on the final regulatory framework and the company’s ability to adapt. For now, PB Fintech’s management has indicated that it does not expect mass layoffs and intends to navigate the transition by focusing on efficiency, volumes and its core insurance platform.