IRDAI has introduced a new distribution channel called Motor Insurance Service Provider (MISP) to increase the sales of motor insurance policies. This will make it possible for insurance companies to appoint automobile dealers as their intermediaries to distribute motor insurance policies.
MISPs will get higher commission than agents and brokers. IRDAI has allowed insurance companies to pay up to 22.5% of total premium as the commission in 2 wheelers and 19.5% of the total premium for other vehicles such as cars and SUVs. This commission structure is applicable only on premium charged towards ‘own damage’. Premium of comprehensive motor insurance policies has two components – third party and own damage.
Currently, general insurance companies can pay up to 15% of the premium as commission on comprehensive motor insurance policies to agents and brokers.
Also, these dealers can provide post sales services like modification, cancellation, renewal and claims servicing of motor insurance policies for which they can charge a fee.
In addition, just like insurance brokers, an MISP can work for multiple insurers.
So far, many automobile dealers have been selling motor insurance policies either through third party brokers or by floating an insurance broking company. In fact, a few automobile dealers have been selling motor insurance policies by acquiring agency license in the name of their family members.
IRDAI has clarified that MISPs cannot sell motor insurance to a prospect who has not purchased a vehicle from it.
Sharad Mathur, Head of Sales & Distribution, SBI General Insurance, “This is a welcome move from the insurance regulator and a win-win for all stakeholders within the industry. Automobile dealers/ intermediaries will now have the option to choose from multiple insurers within a simplified, regulated framework. More importantly, this move is going to benefit the customers in availing cashless service as automobile dealers shall not discriminate between the policyholders who have bought motor insurance policies through them or otherwise. Overall, this move will improve transparency within the system, which when coupled with the existing automated process for policy issuance and claims settlement, will make the environment more conducive for customers, automobile dealers/ intermediaries and customers alike.”