FDI cap on insurance aggregators need to be revisited: Naveen Kukreja

The recent regulations on insurance aggregators restricting non-insurance businesses is forcing players to rethink their business models. Policybazaar.com, the biggest in the business, has done so by launching a separate non-insurance unit - paisabazaar.com.

The Insurance Regulatory and Development Authority (Irda) has barred insurance aggregators from using their websites for sale of any other financial or non-financial products and display of advertisements.

Insurance aggregators compare features and prices of insurance products from different companies.

"At present, our insurance business accounts for 97-98 per cent of our revenue, and the rest come from non-insurance business. In next five years, we expect 25 per cent of our revenue coming from non-insurance business," says Naveen Kukreja, group chief marketing officer and head, paisabazaar.com

Irda has also barred the aggregators from comparing any other financial products. It cannot display ratings or even recommend products.

Apart from this, Irda has also prevented them from charging on a cost-per-lead basis and instead asked aggregators to charge on per-lead basis.

"Though the recent regulations are much more flexible than the set of regulations issued in 2011, we feel not allowing aggregators to compare other products restricts us from achieving economies of scale. It is a challenge to work on and promote two different brands," says Kukreja.

On non-insurance business, the company plans to focus on comparison of credit cards and retail loans. It also plans to develop paisabazaar.com as a full-fledged personal finance advisory portal.

Of the other regulations, Kukreja says the 26 per cent cap on foreign direct investment in insurance aggregator can be done away with. A similar cap exists on insurance brokers.

"The Irda has paid heed to our reservation to the cap and has set up a committee to review the need for FDI cap on insurance aggregators," Kukreja told MONEY TODAY.

Policybazaar.com has 38 per cent foreign direct investment through Intel Capital and Inventus Capital. Another major stake holder in the company is Info Edge India, the promoters of Naukri.com.

"If the Irda sticks to its rule on 26 per cent FDI, we have time till December 2014 to sort things out," says Kukreja.