Shares of insurance companies and financial stocks came under pressure on Thursday following a set of proposed insurance distribution reforms by the Insurance Regulatory and Development Authority of India (IRDAI).
HDFC Life, SBI Life, ICICI Prudential Life, LIC, ICICI Lombard and PB Fintech were among the insurance stocks in focus as brokerages assessed the potential impact of proposed commission and expense-of-management (EOM) changes. All of them crashed at the time of writing.
Bernstein flags impact
Bernstein said the proposed commission cuts were “much worse than imagined” and contrary to its expectation. The brokerage said PB Fintech would be the most impacted, with its unit economics coming under pressure from proposed take-rate caps, including deep cuts in health and motor insurance and implied deferrals on term insurance.
Bernstein expects insurers to also see some drag in health and term insurance growth from the proposed caps. It said insurers with lower costs and a higher agency/ULIP mix, such as LIC and SBI Life, would be less impacted.
The brokerage expects lower costs to be passed on to customers, which could drive some volume uptick. However, it said insurance, being a push-product, is unlikely to see incremental demand structurally offset commission-driven sales volumes.
Bernstein expects severe pushback from the industry and said near-term price action would reflect the pain for PB Fintech given the larger-than-expected commission cuts. It said LIC and SBI Life are better placed heading into a period of sharp moves for insurance sector stocks.
Macquarie on insurers
Macquarie said the proposals include higher caps for tied agents over the banca and broker channel, rewarding selling effort over distribution leverage.
The brokerage said pure-term life first-year commissions are capped at 25-30 per cent, while EOM is squeezed to 12.5 per cent for life and 20 per cent for general insurance over five years.
Macquarie said LIC and SBI Life are relatively insulated, while PB Fintech is the most exposed. It also said Axis Bank and HDFC Bank are affected more than SBI, ICICI and Kotak.
Banks also face impact
HSBC said IRDAI has proposed a broad redesign of insurance distribution and cost structure to improve insurance affordability and penetration. It said the proposed EOM limits are stringent and, if implemented, could have wide implications across insurers, brokers and lenders.
HSBC said SBI Life appears relatively least impacted, while HDFC Life, Max Financial Services and PB Fintech could see higher potential impact.
Jefferies said IRDAI’s distribution consultation paper proposes stricter EOM limits for insurers and one-half to one-third commission cuts in health, term and motor insurance.
The brokerage said this is a risk for PB Fintech and Turtlemint, noting that a 10 per cent cut in new business commission rates translates to a 10-12 per cent fall in their earnings.
On other insurance stocks, Jefferies said any correction in SBI Life, Star and ICICI General Insurance could be a buying opportunity, citing limited risks from the paper, share gain opportunities and scope to expand margins.
For financial stocks, Jefferies said the insurance regulator has proposed tightening caps on insurance commissions from FY28. The regulator has sought public opinion on the draft norms over the next month, with the rules applying prospectively.
Jefferies said the proposals could be mildly negative for banks’ bancassurance fees, particularly credit-protection premiums, as these are mostly single-premium products with high commissions. Based on FY26 bancassurance commission relative to FY27 normalised profit, Jefferies said IIB and IDFC First Bank have higher exposure, while ICICI Bank and PSU banks have lower risk.
Jefferies on Bajaj Finance
Separately, Jefferies maintained a Buy rating on Bajaj Finance with a target price of ₹1,280. The brokerage said Bajaj Finance will seek shareholder approval to raise capital.
Jefferies said leverage is manageable at 4.9x with healthy ROE of 21%. It added that strong loan growth of 23% CAGR, staggered monetisation of an 87 per cent stake in BHFL and management succession in March 2028 may have prompted the capital-raising plan.
Assuming Bajaj Finance raises around 10 per cent of FY28 net worth, Jefferies estimates the amount could be around ₹150 billion, which could lift FY28E EPS by 1 per cent and BVPS by 7 per cent, while ROE tapers marginally.
(This is a developing story)
Published on September 24, 2026
