IRDAI's Proposed Motor Insurance Changes: What New Car Purchasers Need to Know? 

The Insurance Regulatory and Development Authority of India (IRDAI) has suggested several changes to motor insurance regulations, as per news report.  

These include introducing digital purchase options, reducing commissions for third-party insurance, and implementing new rules for motor dealers.  

The objective is to reshape how insurance is bought by new vehicle buyers. 

IRDAI's Planned Changes to Motor Insurance 

IRDAI's proposals aim to introduce digital platforms like Bima Sugam to buy motor insurance for new and old vehicles, with a focus on simplifying the process.  

The digital option is expected to be mandatory for dealers, requiring them to display this as a purchase method prominently. 

Adjusted Commission Rates 

The average commission on motor insurance is reported to have risen sharply, with FY25 figures indicating a range from 13% to 50%. For new vehicles, OEM brokers received an average commission of 27%, while MISPs received about 38%.  

The proposal aims to reduce these rates, especially for mandatory third-party insurance, which saw a rise from 4.3% in FY23 to 22% in FY25. 

Dealer Involvement and Requirements 

IRDAI plans to establish a more formal framework for motor dealers in insurance distribution. Dealers interested in selling insurance will need to register as Insurance Distribution Entities (IDEs) if they meet certain criteria or associate with an IDE or insurer otherwise. 

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Other Proposed Regulatory Measures 

In addition to commission and dealer regulations, the IRDAI suggests ensuring that purchasing insurance from sources other than the dealer should not hinder customers’ access to cashless repair services.  

There are also stipulations regarding customer data sharing with the Public Insurance Registry for validation purposes. 

Conclusion 

The IRDAI's proposals focus on introducing digital purchase options for motor insurance via platforms like Bima Sugam, lowering commission rates for third-party insurance, and restructuring dealer involvement. These initiatives aim to bring more transparency and efficiency in purchasing motor insurance for new car buyers. 

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