Policybazaar & IRDA proposal: Here’s what Kotak Institutional Equities says

Kotak Institutional Equities said if the recent IRDA proposals are implemented, one would have more clarity on the commissions received by PB Fintech (Policybazaar) from its insurance partners, which are currently booked under various heads.

This, the brokerage said, will provide more insights into Policybazaar’s business and increase the Street’s conviction on the business model.

Kotak noted that IRDA has proposed to remove commission caps on various insurance products, providing significant leeway to increase scope of distributors. At a margin, it said, this improves the negotiating power of distributors, even as most current distribution arrangements are driven by fair considerations.

Kotak said distribution of insurance policies is complex and requires reach, education, nudge and sales motivation.

While some distributors provide last-mile reach to the customer, corporate partnerships including banks and Policybazaar play a more comprehensive role in educating, motivating and managing a large sales fleet.

“This significantly reduces the burden of the insurance company who can focus on product, channel/partnership and risk management but involves higher expenses to the distributor. Restrictions on payouts, hence, indirectly constrained the role of distributors,” it said.

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