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The Insurance Regulatory and Development Authority of India is considering certain modifications to draft distribution paper, sources told CNBC-TV18 on November 13.
Consequently, PB Fintech shares were trading nearly 5% higher.
New draft paper on distribution reforms is likely by mid-December and the new paper will be made based on feedback received, the channel reported.
A news report said IRDAI received more than 2 lakh responses on its paper.
PB Fintech shares crashed in late September after IRDAI released a consultation paper proposing sweeping changes to insurance distribution, including commission caps across health, motor and life insurance. The proposed framework has raised concerns over the economics of online insurance distribution and the potential impact on Policybazaar's revenue and profitability.
PB Fintech management has indicated that the proposals in their current form could result in roughly a 30% hit to core revenue before offsets, with the pressure concentrated in general insurance. The company has identified slower hiring, lower marketing expenditure and other cost adjustments among the measures that could help cushion the impact.
Brokerages have also sharply reassessed the company's earnings outlook. HSBC last week downgraded PB Fintech to 'Hold' and cut its target price to Rs 1,150 from Rs 2,100, while Motilal Oswal retained a 'Neutral' rating with a Rs 1,150 target.
However, Bernstein retained an 'Outperform' rating and a target price of Rs 2,310 earlier this week despite estimating that the proposed framework could cut insurance take rates by around 40% and potentially reduce FY28 profit by 34%.
Brokerage firm Bernstein said PB Fintech could face some pain in the near-term as the cuts explained in the draft papers of IRDAI will hurt the company the most as the call centre costs do not hold up at these take-rates. The brokerage said the proposed commission cuts are "ugly" and that PB Fintech's unit economics "unravels" at the proposed take rate in the draft paper. Bernstein said insurers will also see some drag on health and term growth from proposed caps. However, insurers such as SBI Life Insurance Co. and Life Insurance Corp. will be less impacted due to their lower costs and higher agency and unit linked insurance plan mix.
The insurance regulator proposed overhauling commission rules to cap payouts, link them to product complexity and spread life insurers' commissions beyond a policy's first year.
PB Fintech's business model will be on the radar as the company faces a sharp cut in health renewal and porting commissions, first-year term life commissions, and motor own-damage and third-party commissions, Emkay Global said.
