Why the insurance story survives beyond Policybazaar

If you purchased term insurance with a premium of ₹20,000 through an agent, as much as 50% of that first-year premium may go to the agent. That is not a guess; data published by the Indian insurance regulator (IRDAI) shows that commissions on pure term plans are as high as 51% of the first-year premium.

IRDAI is now looking to amend this. On September 23, it released a consultation paper proposing hard caps on what insurance sellers can earn.

Consequently, shares of PB Fintech (owner of Policybazaar) fell 36% on September 24 and fell another ~4% on September 25. In fact, it might just be the only stock to hit a 52W high and then touch a 52W low in less than 24 hours!

The market read this as a pay cut for Policybazaar and Turtlemint. But this story is not about that. The question to be asked is: what does this move by the regulator mean for the insurance industry and then, consequently, what would it mean for the players in the industry?

The past offers fair guidance. In this story, we look at how such regulations have fared in the past, both in India and abroad.

Here’s a look at four past commission caps for financial sector distributors, and what followed.

India, 2009: Mutual funds lost the upfront cut but kept growing

Until July 2009, MF investments earned the distributor an entry load of as high as 2.25%. Think about it, on a SIP of ₹5,000, ₹112.50 went to the seller before a single unit was bought. SEBI banned this from August 1, 2009. Fund assets were about ₹7.5 lakh crore in August 2009. They stood at ₹87.08 lakh crore in August 2026. Despite lower fees distributors have benefitted from a staggering 11x growth in the funds under management.

To be certain, rising markets did a lot of that lifting. The ban did not create growth. But it did not stop it either. And ask any mutual fund distributor today. The combination of transparent fee structures, clearly disclosed costs, and investor-friendly regulations has made mutual funds far easier to explain and recommend to first-time investors than ever before. This growing trust in the product has been one of the key drivers of industry adoption. Supported by AMFI's observation that "trust is reinforced through transparency," which has helped deepen investor participation.

Asset management companies have seen their AUMs and share prices both rise in the long term, and improving confidence in the product has led to a surge in its adoption.

India, 2010: ULIP sellers followed the money

IRDAI overhauled ULIPs (Unit Linked Insurance Plan) in September 2010. It banned upfront commissions (as high as 30%) and spread payouts over a 5-year lock-in. As an immediate reaction, traders switched from selling ULIPs to more traditional plans. In FY12, new ULIP premiums fell 67%, while traditional plans grew 32%. Have ULIPs disappeared? No. In FY26, they formed as much as 44% of HDFC Life's individual annualised premium.

Most market watchers and industry players agree that, while fee rationalisation adversely impacted distributors’ short-term revenue, over the long term, in a market as price-sensitive as India definitely helped to

• Improve product adoption (simply by making it cheaper)
• Create a more transparent structure
• Remove incentives to mis-sell products, which further fuels confidence

Now let’s look at examples from other markets.

China, 2023: the insurer kept what the seller lost

In August 2023, China's regulator told insurers to pay banks no more commission than the rates they had filed. Average commission rates fell by about 30%. Meanwhile, China Life's value of new business rose 35.7% in 2025 to ¥45.75 billion, its fastest growth since 2017, which was also supported by a shift to participating products.

Indian markets sorted winners from losers similarly this week. While PB Fintech slumped, HDFC Life was flat, LIC rose nearly 1% and ICICI Lombard gained 3%.

Australia, 2018-2020: when the cut went deep, sellers left

Australia cut upfront life insurance commissions from about 120% of the first-year premium in 2018 to 60% by January 2020. Adviser numbers fell from about 28,000 in late 2018 to 15,099 in June 2026. New life insurance policies issued fell from 103,000 in 2018 to 44,000 in 2023.

Stricter education rules and banks leaving the advisory business also pushed advisers out.

What the old cases say about Policybazaar

Two questions separate these outcomes. Could sellers still earn enough from the work they do after the sale? And will the draft be implemented in the current form?

Where the money went each time

Source: Compiled by the author from the sources cited above.

_Disclaimer: Views and opinions expressed in the article are the author's own and do not reflect those of Upstox. Stocks and securities mentioned are illustrative and not recommendations. Please consult a registered financial advisor before making any investment decision. _