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Update| September 25, 20:00 IST Shares of PB Fintech ended 3.6% lower at ₹1,165.50 apiece on the BSE. Turtlemint remained locked at its 20% lower circuit at ₹87.30 throughout the trading session. Original| Sepetmber 25, 13:00 IST The sell-off in insurtech stocks continued for the second straight session today as the Insurance Regulatory and Development Authority of India’s (IRDAI) proposed overhaul of insurance distribution commissions rattled investors. Shares of Policybazaar parent PB Fintech fell as much as 7.8% to touch a fresh 52-week low of ₹1,115.10 on the BSE. Meanwhile, Turtlemint shares opened at their 20% lower circuit of ₹87.30, which was also the stock’s fresh all-time low. The stocks later pared some of their losses. At 12:21 IST, PB Fintech was trading 5.12% lower at ₹1,148.10, with a market capitalisation of ₹53,128.6 Cr (about $5.5 Bn). Turtlemint was trading 18.84% lower at ₹88.55, giving the insurtech company a market capitalisation of ₹2,607.6 Cr (about $272 Mn). At the prevailing prices, PB Fintech shares have fallen about 39% across the two sessions, while Turtlemint has declined about 35% from its level before the sell-off began. The rout began yesterday after IRDAI released a consultation paper proposing product- and channel-specific commission ceilings for insurance distributors. The proposed framework would reintroduce product-level commission caps more than three years after the regulator removed such limits in April 2023 and shifted to an expenses of management (EoM) framework. Under the proposed framework, commissions for insurance distributors would vary based on the product, distribution channel and effort involved in selling and servicing a policy. Open-architecture insurance distribution entities such as Policybazaar and Turtlemint’s insurance broking arm would generally face lower caps than individual agents and other distributors. For digital insurance distributors, the proposed changes could put pressure on revenue from health, motor and life insurance, while forcing platforms to rethink customer acquisition costs and sales incentives. PB Fintech cofounder and group chairman Yashish Dahiya said during an investor call yesterday that the proposals have “almost forced” the company to consider entering insurance manufacturing, which would allow it to design, underwrite, and sell policies itself, though it would wait for greater regulatory clarity. The proposals are not final, with IRDAI inviting stakeholder comments until October 25. ‘Much Worse Than Imagined’ As PB Fintech and Turtlemint extended their sell-off, brokerages began quantifying the potential impact of IRDAI’s proposed overhaul. Bernstein described the proposed commission cuts as “much worse than imagined”, warning that they could unravel PB Fintech’s unit economics, particularly in health and motor insurance. Jefferies retained its ‘Buy’ rating on PB Fintech but cut its price target to ₹1,540 from ₹2,050. It estimated that a 10% reduction in new business commission rates could translate into a 10%-12% decline in earnings. The brokerage also flagged the proposals as a risk for Turtlemint. Bank of America retained its ‘Neutral’ rating on PB Fintech but cut its price target to ₹1,410 from ₹1,970. It described the proposals as directionally negative for online insurance brokers, though it expects the impact on Policybazaar’s life and term insurance businesses to remain manageable. Morgan Stanley said that the net present value of PB Fintech’s health insurance business could fall 60%-70% under the proposed framework, while the impact on its life insurance business could be relatively limited. HSBC downgraded PB Fintech to ‘Hold’ and cut its price target to ₹1,150 from ₹2,100. It also slashed its FY28 and FY29 earnings per share estimates by 56% and 17%, respectively. Motilal Oswal Securities said that the proposals could reduce PB Fintech’s FY28 core online insurance revenue by 30%. Without cost reductions or additional revenue streams, this could translate into a 46% cut to its earnings estimate. Citi said distribution economics could compress by 70%-90% across several high-margin insurance categories if the proposals are implemented in their current form.
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