Deepak Shenoy backs consumer-centric insurance reforms despite near-term distributor pain

A fresh regulatory push aimed at altering commission structures in the insurance industry could trigger near-term disruption for distributors but may ultimately strengthen the sector by aligning incentives more closely with consumer interests. At the same time, India’s listed retail companies are grappling with a contrasting challenge: sustaining high valuations in an environment where growth is slowing even as margins improve.

Speaking on ET Now, Deepak Shenoy, Founder & CEO, Capitalmind MF said he hoped the proposed changes to insurance commissions would be implemented from a consumer perspective. He pointed out that payouts in general insurance, particularly in the first year or two, are substantially higher than in most other financial products when measured as a percentage of commissions. This, he noted, has historically skewed distributor focus toward insurance products where higher commissions are available.

Shenoy explained that despite growing awareness among both consumers and distributors, there are very few products that allow distributors to voluntarily accept lower commissions in exchange for better customer deals. As a result, any meaningful change would need to come through an industry-wide rule rather than individual negotiation. Such a shift, he said, would affect distributors, brokers and other intermediaries from a cash-flow perspective, even if overall commission earnings remain similar over a longer period rather than being front-loaded.

According to Shenoy, insurers may see a temporary slowdown in business as distributors adjust to lower upfront commissions, but the broader industry could benefit over time. Better value for customers typically translates into wider adoption, though this transition could take a year or two. During this adjustment phase, he expects the economic impact to be felt more sharply by distributors than by insurance companies themselves, noting that insurers are built with long-term horizons of 40 to 50 years, while distributors rely more heavily on ongoing cash-flow-based incentives.

Turning to the retail sector, Shenoy addressed concerns around slowing topline growth, elevated valuations and improving margins. He said that in a highly competitive industry like retail, high multiples are a source of concern. Competition tends to compress margins unless growth slows, and in the current environment, margin expansion appears to be coming at the cost of growth.

He observed that increasing competition from quick commerce and online players is spreading consumer purchases across multiple platforms rather than concentrating them among a few large players. As a result, individual retailers may report lower growth even though the overall industry continues to expand. At the same time, as consumers shift low-margin purchases such as daily groceries to alternative channels, retailers may see margin expansion in their remaining product mix, where higher-margin categories account for a larger share of sales.

Shenoy cautioned that while this dynamic can lift EBITDA and profitability in the short term, it does not support high valuations. “This is not useful for a high multiple,” he said, adding that high valuations can only be justified by sustained growth alongside stable margins. He warned that an industry overly focused on protecting margins rather than creating incremental value for consumers risks disappointing investors over time.In his view, while competitive churn could eventually benefit the retail sector as a whole, it may not necessarily improve the economics of individual players. Given stretched valuations, Shenoy said he would require significantly lower prices to justify the risk of investing in the retail space at this stage.