Insurance Stocks Crash: PB Fintech, Max Financial, HDFC Life Tumble After IRDAI Proposes Commission Caps

The Insurance stocks are under heavy selling pressure since yesterday September 24, after the Insurance Regulatory and Development Authority of India (IRDAI) proposed new changes to the insurance distribution.

PB Fintech, Max Financial Services, HDFC Life and many other insurance-related stocks fell sharply.

The sell-off came after IRDAI released its consultation paper titled "Recalibrating Economics of Insurance Distribution", which proposes changes to insurance commissions, Expenses of Management (EoM), distribution structures and market-conduct rules. The proposals are not final yet, with stakeholders invited to submit comments by October 25, 2026.

PB Fintech Share Price Crashes Over 30%

PB Fintech, the parent company of Policybazaar, was one of the biggest casualties of the sell-off.

The stock fell as much as 33.27% to Rs. 1,258.80 during Thursday's session. It eventually closed at around Rs. 1,244, down roughly 34% from the previous day's close of Rs. 1,886.30.

As of Friday, PB Fintech shares were down another 3% at the time of writing around 9:40 AM and the stock was trading at Rs. 1179.30 apiece on the NSE.

The sharp decline wiped out a huge amount of the company's market value as investors worried that lower commission limits could put pressure on the economics of online insurance distribution.

Max Financial, HDFC Life And Other Insurance Stocks Fall

The selling was not limited to PB Fintech. Max Financial Services, HDFC Life, SBI Life, ICICI Prudential Life and LIC were among the insurance stocks that came under pressure, while insurance-distribution companies such as Turtlemint saw heavy selling.

At the time of writing today as of September 25th, Max Financial services shares are recovering slightly and are trading at Rs.1,423.90 up by 0.99%. While HDFC Life shares are at Rs. 518.45 down by 1.60%.

SBI Life shares are also in the negative zone at Rs.1,738.60 down by 0.93% today. Similarly ICICI Prudential Life is down by 0.46% and LIC shares are down by 0.44%

Reason Behind Insurance Stocks Fall

The main concern is that the proposed rules could reduce the amount insurers and distributors are allowed to spend on selling and servicing insurance products. IRDAI has proposed a phased reduction in Expenses of Management (EoM).

For life insurers, the EoM limit would move to a company-level limit linked to Gross Direct Premium Income (GDPI), reaching 15% within two years and 12.5% within five years.

For general insurers, IRDAI has proposed changing the calculation from Gross Written Premium to domestic GDPI, with the limit gradually reducing from 30% of GWP to 20% of GDPI over five years.

The regulator said the proposed reduction is meant to lower the overall cost of insurance and improve returns to policyholders in life savings products.

New Insurance Commission Caps

The consultation paper also proposes a new commission cap. So instead of applying a uniform approach, commission limits would depend on various factors. Insurers and large distribution entities would also have to disclose their commission policies and structures in a simple manner.
For example, the proposed rules include different commission limits for different types of life insurance products. For life policies with terms of 10 years or more, the first-year commission for agents has been proposed at 25%, while distribution entities would have a proposed first-year limit of 20%. IRDAI has also proposed specific commission limits for health insurance products.

"Life insurance companies, at CMP, bake in low growth rates (Exhibit 18). We expect some weakness in volume growth as lower commissions in savings and credit protection may put near-term pressure on volumes. Life insurance, despite the cut, will remain a high-commission product, with arguably tailwinds in some segments after these guidelines," said Kotak Securities in a report.

"There may not be any destruction of the distribution franchise, as feared by the Street; we do expect some weakness in the initial phase of realignment. SBI Life, the lowest cost and commission-paying player (Exhibit 19) is best placed. Although HDFC Life has a large credit protection business, it may gain counter share at the parent bank, in the absence of uncapped commissions," the report further added.