Big news is coming from India’s health and general insurance sector. Several major insurance companies have decided to reduce commissions for online insurance platforms such as Policybazaar.
The new commission structure will come into effect from December 1, 2025.
This decision comes at a time when insurance companies’ costs have risen by 10–12% due to GST reforms.
Additionally, the Insurance Regulatory and Development Authority of India (IRDAI) has capped total expenses under its Expense of Management (EoM) rule at 30%, forcing insurers to cut costs.
Commission Cuts for Online Platforms
Industry sources say that insurers like ICICI Lombard, Care Health, Niva Bupa, and Aditya Birla Health Insurance will reduce commissions paid to Policybazaar and similar digital distributors.
Earlier, Policybazaar earned 15–18% commission, which will now drop to 12–14%.
This change could directly affect Policybazaar’s parent company, PB Fintech, since around 60% of its total revenue comes from the health insurance business.
Many insurance companies have already notified their agents, bank partners, and digital distributors that the new commission model will begin from December 1.
Insurers had earlier reduced payouts for offline channels like banks and agents, and are now applying similar cuts to digital platforms.
Understanding the EoM Limit and Cost Challenges
The Expense of Management (EoM) rule by IRDAI restricts insurers from spending more than 30% of their total premium on marketing, operations, salaries, and commissions.
After the 2025 GST reforms, insurers can no longer claim Input Tax Credit (ITC) on agent commissions and operating costs.
As a result, their overall expenses have increased by 10–12%, even though they must still operate within the same 30% cap.
To manage costs, many companies have reduced salaries, cut operational expenses, or slashed commissions.
Good news for policyholders: Thanks to the Department of Financial Services (DFS), hospital charges are expected to remain stable next year.
Pressure on Policybazaar’s Earnings
The commission cuts will hit Policybazaar (PB Fintech) the hardest.
Since health insurance makes up about 60% of its total revenue, a drop in commissions could lead to annual losses of ₹250–₹300 crore.
The company had set a profit target of ₹1,000 crore by FY27, but analysts now believe this may be difficult to achieve if the trend continues.
Impact on Customers and the Market
In the short term, this commission change won’t affect insurance prices or premiums. However, over time, it could impact distribution networks and customer choice.
Market experts warn that if commissions fall too low, small agents and distributors may exit the market, leaving fewer options for customers.
Why Insurers Took This Step
Insurance companies say the move isn’t about boosting profits, but about staying within regulatory expense limits.
Many insurers are still struggling with loss ratios and underwriting profits, making every bit of cost saving essential to maintain stability.
