Shares of PB Fintech Ltd, the parent company of Policybazaar, have witnessed a sharp decline of more than 7% in just two trading sessions. This sell-off reflects mounting investor anxiety over a new regulatory challenge—the Insurance Amendment Bill 2025—which compounds existing uncertainties stemming from recent Goods and Services Tax (GST) revisions.
Double Regulatory Whammy: GST and Commission Caps
The company's stock had barely started recovering from the disruptions caused by GST changes when the new insurance bill emerged as a fresh headwind. To understand the full picture, one must first look at the GST impact. PB Fintech's core online insurance broking platform, policybazaar.com, earns commissions from insurers. Since 22 September, the collection of insurance premiums was exempted from GST. This move eliminated the input tax credit on GST paid for commissions, effectively raising costs for insurance providers.
Analysts fear that insurers might partially offset this increased cost burden by reducing the commission rates they pay to intermediaries like Policybazaar. The precise effect of this potential reduction is expected to become clear in the company's Q3FY26 or Q4FY26 results.
The New Threat: Insurance Amendment Bill 2025
Amid this backdrop, the proposed Insurance Amendment Bill 2025 introduces another layer of risk. The bill aims to empower the Insurance Regulatory and Development Authority of India (IRDAI) to cap the commission expenses of insurance companies. A specific concern revolves around the practice of front-loading commissions, where agents receive a disproportionately high payout in the first year of a policy, which tapers off later.
Regulators are considering measures to even out commissions over the policy's term to incentivize agents to ensure customer persistence. Any regulatory intervention capping or altering commission structures could directly hit Policybazaar.com, which is PB Fintech's primary profit engine, funding its other ventures.
In Q2FY26, Policybazaar.com contributed a dominant 89% of the core online business revenue, amounting to ₹852 crore, while Paisabazaar.com accounted for the rest. Notably, Policybazaar's revenue grew 37% year-on-year, whereas Paisabazaar's declined by 22%.
Potential Financial Impact and Valuation Concerns
The financial implications could be significant. Policybazaar's take rate, or average commission, remained steady at 16% in Q2FY26. A simple calculation illustrates the risk: if the company's FY26 premium collection grows 35% to ₹22,000 crore, but the average commission rate falls by just 100 basis points (1%), it could lead to a revenue loss of approximately ₹220 crore. Since this loss would not be accompanied by a corresponding drop in costs, it would flow directly through to EBITDA, jeopardizing current earnings estimates.
This fluid earnings picture is making investors cautious about the stock's valuation. PB Fintech is currently trading at a PEG ratio of 1.6x based on FY27 estimates from Motilal Oswal Financial Services, which is higher than fintech peer Paytm's (One 97 Communications) valuation of 1.3x.
However, it's not all negative. If IRDAI mandates lower commission rates, the benefit may likely be passed on to consumers as lower premiums. This could potentially boost insurance adoption and premium volumes, offsetting some of the impact on Policybazaar's commission revenue. Nevertheless, in the near term, the combination of GST-related pressures and regulatory overhang from the insurance bill presents a clear challenge for PB Fintech and its investors.
