Insurance companies cut commissions paid to Policybazaar by 18%

Major insurance companies in India have begun reducing the commission payouts to distributors and online aggregators such as PolicyBazaar by approximately 18 %, in response to recent tax and regulatory changes.

Effectively, what was earlier a commission of, say, ₹1,000 is now worth only about ₹847, after the adjustment.

Why This Commission Cut Is Happening

1. The central government reduced Goods & Services Tax (GST) on many individual insurance policies to zero %, meaning insurers no longer charge GST on premiums for certain products.
2. Because the output (the insurance premium) is now exempt from GST, insurers lose the ability to claim Input Tax Credit (ITC) on expenses like commissions, which were earlier subject to GST.
3. To compensate for this loss of ITC, insurers are restructuring their payouts to intermediaries/distributors, resulting in lower net commissions.

Impact on PolicyBazaar / PB Fintech & Distribution Channels

• PB Fintech (which operates PolicyBazaar) stands to see a reduction in its commission revenue from insurers, especially for health and general insurance segments where these changes apply.
• Agents and smaller distribution partners are also affected: the reduction may squeeze margins and could influence their willingness or ability to push certain products.
• For PolicyBazaar, the change adds pressure on profitability and may force a larger strategy shift (in terms of product mix, scale, costs).
• Insurers may attempt renegotiations of commission structures with aggregators and brokers. Some media suggest talks are already underway. YouTube

Wider Industry Implications

• Distribution networks (digital aggregators, brokers, agents) may see tighter economics, particularly for less-profitable policy lines.
• Insurers will have to manage margin pressures while still ensuring they can distribute policies effectively.
• There may be a ripple effect on insurance penetration (especially in smaller towns) if distribution becomes less financially rewarding for intermediaries.
• Consumers may benefit from premium savings (since insurers are passing on tax benefits) but the ecosystem supporting distribution is under stress.

What to Watch

• How PolicyBazaar and other aggregator platforms respond: cost cutting, diversification of revenue (beyond commissions), new business models.
• Whether insurers revise commission bands further or provide alternate incentives to retain distributor motivation.
• Regulatory response: Given the role of aggregators in promoting insurance penetration, the regulator Insurance Regulatory and Development Authority of India (IRDAI) may intervene if distribution gets adversely impacted.
• Impact on customers and product availability: Will fewer agents/distributors push certain policies? Will aggregator platforms change how they market or bundle policies?
• Broader financial performance of PB Fintech, especially if significant portion of revenue comes from commissions that are now under pressure.

Final Thoughts

The approximately 18 % commission cut to PolicyBazaar and similar distribution channels is a tangible example of how tax and regulatory changes can ripple through an industry. While the end consumer may benefit from lower premium costs, the distribution ecosystem is facing headwinds. For PolicyBazaar, this presents near-term revenue challenges and may force strategic recalibrations. For the insurance industry, maintaining a robust distribution network while managing cost pressures will be critical.