The Insurance Regulatory and Development Authority of India (IRDAI) is cracking down on unauthorised sale of motor insurance policies by service providers.
While in the past, there were multiple instances of Original Equipment Manufacturers (OEMs) dictating terms to dealers on the insurance being sold, this will now be under control.
In a circular to motor insurance service providers (MISP), IRDAI said that no MISP or insurance intermediary can enter into an agreement with the OEM that has an influence or bearing on the sale of motor insurance policies.
Motor third party insurance is mandatory for all vehicles running on Indian roads. These products are usually purchased from the same dealer from where an individual buys his car or bike.
“A few of the industry players were being particularly excluded from these panel of insurance companies for selling motor insurance. This was against competitive market practices and we complained to the regulator,” said a senior official of a mid-sized general insurance company.
In the circular, which was viewed by Moneycontrol, IRDAI said that they have received representations from insurance companies that they are not included in the panel of MISPs even after requesting to be on them.
“The Authority is of the view that with the commission / remuneration levels for the insurance intermediaries and MISP being stipulated, the creation of a panel of insurers is restrictive, which can lead to undesirable market practices,” said IRDAI in the circular.
A few OEMs have some links with certain insurers that lead them to dictate to dealers and other MISPs that only those motor policies can be sold.
To remove any misgivings from the minds of stakeholders, IRDAI has clarified that neither the insurance broker nor the MISP can create such a panel of insurer for selling motor insurance policies.
However, the regulator added that insurance companies should enter into service level agreements with insurance brokers/ MISPs based on transparent and objective criteria.
OEMs are out of the purview of the insurance regulator and hence IRDAI has not been able to take action against some malpractices that led them to get dealers to force only some insurers’ products. From now on, MISPs will be required to offer products of all companies for customers to choose.