Noida, Sep 24 (APAC Media): Shares of insurance companies and distribution platforms came under pressure on Thursday after the Insurance Regulatory and Development Authority of India (IRDAI) proposed a broad overhaul of the insurance distribution framework, including changes to commissions, expense limits and digital practices.
PB Fintech, the parent company of Policybazaar, fell 15 per cent to hit its lower circuit of Rs 1,603.30 on the NSE in early trade. Turtlemint Fintech Solutions declined 20 per cent, while HDFC Life Insurance fell more than 7 per cent. SBI Life Insurance also traded lower, while Life Insurance Corporation of India (LIC) gained during the session.
The market reaction came after IRDAI issued a consultation paper titled “Recalibrating Economics of Insurance Distribution”, proposing changes across distribution structures, commissions, expenses, market conduct and transparency.
The regulator has proposed reorganising the existing distribution framework into three broad categories — Insurance Distribution Entities, Insurance Distribution Persons and Market Infrastructure Institutions.
It has also proposed a phased reduction in the Expense of Management (EoM) limits. For life insurers, the EoM limit would be linked to gross direct premium income and reduced to 15 per cent within two years and 12.5 per cent within five years.
For general insurers, IRDAI has proposed shifting the calculation from gross written premium to domestic gross direct premium income, with the expense limit declining to 20 per cent over five years.
“The proposed reduction in EoM is intended to lower the overall cost of insurance, thereby expanding the risk pool available in general insurance and enhancing returns to policyholders in life savings products,” IRDAI said in the consultation paper.
The regulator has also proposed restrictions on “dark patterns” on insurance websites. These include practices that require consumers to submit personal information before they can access basic details about products, prices or service quality.
“That is one of the ‘dark patterns’ often seen on the websites of most insurers and distributors. That is also against the guidelines issued by the Central Consumer Protection Authority under the Consumer Protection Act, 2019,” IRDAI said.
Under the proposed commission framework, there would be no uniform commission structure across all insurance products. Limits would instead take into account the insurance segment, line of business, distribution channel, product complexity and the effort required to sell and service a policy.
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Disclaimer: This article is for informational purposes only and is based on publicly available information. APAC Media is not responsible for investment decisions or losses. Please conduct your own research or consult a financial adviser before investing.
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