Insurance regulator IRDAI has allowed all general insurers to sell motor insurance policies through auto dealer networks and with differential pricing, in a bid to offer more choices to customers in terms of pricing and to increase competition.
Previously, it was mandatory for a customer to buy an auto insurance from an insurer with whom the auto dealer already had an exclusive arrangement. The new rule means that insurers, which were not part of auto networks so far, may also get an opportunity to sell their policies to customers of car dealers, reported Press Trust of India. Also, insurers were previously not allowed to offer differential pricing which would reward good customers and impose higher premiums on bad customers.
The new rules are issued after IRDAI set up a committee to study motor dealer payouts. The committee submitted its report in May last year. Based on the report and interactions with insurers and other stakeholders, IRDAI framed the new regulation.
An IRDAI circular recognises the role of auto dealers in distributing and servicing of motor policies along with regulatory oversight over their activities connected to insurance. A part of the industry feels that it is a landmark step by IRDAI to bring auto dealers under its purview. Even though vehicle dealers have been selling insurance for a long time, it is the first time that they are recognised by the regulator as motor insurance service providers.
The IRDAI has also allowed higher commissions to be paid to auto dealers by insurers.
"The new guidelines are good as they bring robustness to the sector as this segment is responsible for over 40% of our premium income," ICICI Lombard's Managing Ddirector and Chief Executive Bhargav Dasgupta said.