IRDAI overhaul may force insurance brokers to rethink deal valuations

What happened: IRDAI has proposed prescriptive commission limits based on product complexity, distribution channel and selling effort, plus lower expense-of-management limits and greater scrutiny of distribution costs. Why it matters: Executives said the changes could make it hard for buyers to value brokerage businesses on existing revenue and margins, potentially affecting Alliance Insurance Brokers' proposed stake sale and the InsuranceDekho-RenewBuy proposed IPO. Higher compliance costs and lower payouts could accelerate consolidation among smaller brokers.

IRDAI has proposed prescriptive commission limits based on product complexity, distribution channel and selling effort, plus lower expense-of-management limits and greater scrutiny of distribution costs.

Executives said the changes could make it hard for buyers to value brokerage businesses on existing revenue and margins, potentially affecting Alliance Insurance Brokers' proposed stake sale and the InsuranceDekho-RenewBuy proposed IPO. Higher compliance costs and lower payouts could accelerate consolidation among smaller brokers.