Policybazaar suffers a major setback! The commission formula will change from December 1st. Learn why this decision was made.

Health insurance companies have decided to cut commissions for platforms like Policybazaar from December 1st. Following the GST reforms, insurance companies' costs have increased by 10–12%, while IRDAI's 30% expense limit has increased pressure.

Big news is coming from the health and general insurance sector. Several major insurance companies have decided to cut commissions for online insurance platforms like Policybazaar. The new commission structure may be implemented from December 1st, 2025. This decision comes at a time when insurance companies' costs have increased by 10–12% following the GST reforms, and IRDAI's 30% expense limit (Expense of Management Cap) has forced companies to reduce expenses.

Insurance companies decide to reduce commissions

According to insurance industry sources, several major insurers, including ICICI Lombard, Care Health, Niva Bupa, and Aditya Birla Health Insurance, have decided to reduce the commissions they pay to online channels, including Policybazaar. Previously, Policybazaar received a commission of 15–18% from these companies, which could now drop to 12–14%. This move could directly impact Policybazaar's revenue growth, as its parent company, PB Fintech, generates approximately 60% of its total revenue from the health insurance business.

New structure to be implemented from December 1st

Many insurance companies have informed their agents, banking partners, and digital distributors that a new commission formula will be implemented from December 1st. Previously, insurers had reduced payouts to offline channels (such as banks and agent networks). Now, the same strategy is being implemented for digital distributors as well.

What is the EoM limit and why are the difficulties increasing?

EoM, or Expense of Management, is a limit set by the Indian insurance regulator, IRDAI. According to this rule, no insurance company can spend more than 30% of its total premium, which includes marketing, operations, salaries, and commissions. However, after the 2025 GST reforms, insurance companies are no longer receiving the benefit of Input Tax Credit (ITC).

Earlier, companies were able to take GST credit on agent commissions and operational expenses, but this facility has now ended. Their total costs have increased by 10–12%, and they are now forced to manage within the same 30% limit. Many insurers have reduced salaries and other operational expenses, while some have directly reduced commissions.

Pressure on Policybazaar's earnings

The commission cut will have the biggest impact on Policybazaar (PB Fintech). Health insurance accounts for approximately 60% of the company's revenue, and this segment is currently the most affected. According to market analysts, if commissions decline by an average of 15–18%, Policybazaar could incur annual losses of ₹250–₹300 crore. The company had set a target of ₹1,000 crore in profits by FY27, but achieving this target now appears difficult.

How will it impact customers?

The reduction in commissions will not currently impact insurance product prices or premiums. However, in the long term, it could impact distribution networks and market reach. According to a market expert, if commissions fall too low, small distributors and agents will be forced out of the market, leaving customers with limited options.

Why is this step necessary for insurance companies?

Insurance companies claim that they have taken this decision not to increase profits, but to stay within regulations and expense limits. According to many companies, they are still struggling with their loss ratio and underwriting profit. In such a situation, every percentage of cost savings is crucial for them.

FAQs

1. Why did insurance companies reduce commissions?

Their costs increased after the GST reforms, and it was necessary to stay within the IRDAI's EoM limit.

2. When will the new commission rule come into effect?

From December 1, 2025.

3. Which companies will be affected?

Policybazaar, banking channels, and offline agents will all be affected.

4. How much will Policybazaar be affected?

Health insurance accounts for 60% of total revenue, which could impact the company's earnings by 15–20%.

5. Will insurance become more expensive for customers?

Not at the moment, but insurance companies may adjust premiums in the future.

Big news is coming from the health and general insurance sector. Several major insurance companies have decided to reduce their commissions to online insurance platforms like Policybazaar. The new commission structure is expected to be implemented from December 1, 2025. This decision comes at a time when insurance companies' costs have increased by 10-12% following GST reforms, and IRDAI's 30% expense management cap has forced companies to reduce expenses.

Insurance Companies Decide to Reduce Commissions

According to insurance industry sources, several major insurers, such as ICICI Lombard, Care Health, Niva Bupa, and Aditya Birla Health Insurance, have decided to reduce the commissions they pay to online channels, including Policybazaar. Previously, Policybazaar received 15-18% commissions from these companies, which could now drop to 12-14%. This move could have a direct impact on Policybazaar's revenue growth, as its parent company, PB Fintech's health insurance business contributes around 60% of its total revenue.