SBI Life, LIC face least impact from new commission caps by IRDAI, says Harshal Mehta

Harshal Mehta, Vice President of Equity Research at Asian Markets Securities (AMSEC), said SBI Life and LIC are the best-placed life insurers as India’s Insurance Regulatory and Development Authority of India (IRDAI) moves to cap commissions and expense-of-management (EOM) ratios. He said, “SBI Life, the impact is lower because the commission and OPEX is what they enjoy,” pointing to a cost base that already sits below the rest of the industry. Life Insurance Corporation of India, he added, benefits from its large agency network, which allows more flexibility on payouts under a closed distribution structure.

The comments followed a market-wide selloff in insurance and lending stocks after the proposed caps were announced. PB Fintech, the parent of Policybazaar, lost roughly ₹25,000 crore in market capitalisation in a single session. Turtlemint also fell sharply. Banks and insurers with large insurance-distribution businesses sold off as well.

Mehta said the impact of the new caps varies widely by company and product segment. Credit life insurance faces the sharpest commission cuts, capped near 2-2.5%, down from far higher levels earlier. ULIP products face a smaller reduction.

ICICI Prudential sits between the two groups. Mehta said the company’s product and channel mix is spread across bancassurance and agency distribution, giving it a moderate impact similar to SBI Life.

HDFC Life and Max Financial face the sharpest near-term commission cuts because of their heavy reliance on bancassurance and broker channels. But Mehta flagged a possible upside: if payout cuts push banks such as HDFC Bank and Axis Bank to sell fewer third-party insurance products and instead favour closed-architecture partners, HDFC Life and Max Life could gain market share and see earnings upgrades. He called this the key variable to watch going forward.

Mehta said most of the bad news is already priced in on PB Fintech after the stock’s sharp fall, but cautioned that “the bulk of the downside seems to be built in, but further corrections can’t be ruled out.” He estimated fair value at 9-10% growth, translating to a stock price of around ₹900 to ₹1,000.

He added that on the post-market earnings call, management outlined several offsets: cutting operating costs, exploring an insurance manufacturing license, and highlighting other business lines. He said the final regulatory rates still need to be confirmed before taking a firm view on the stock.Mehta also flagged a positive from Niva Bupa‘s earnings call. Management there expressed confidence in meeting the proposed EOM limit through a combination of commission cuts and operating leverage, with lower premiums expected to improve the health insurance segment’s growth, which he said has historically shown stronger price elasticity than other segments.

For the full interview, watch the accompanying video

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