The insurance regulator has directed the insurance company to either remunerate the motor insurance service providers (MISPs) with incentives or pay them commission. In other words, insurance companies cannot pay them both – commission and incentive on the motor insurance policy.
IRDAI has issued this clarification in the wake of unhealthy practices in which a few insurers have paid commission and incentive on motor insurance policies.
In the circular, IRDAI has said, “To check undesirable practices in the market, it may kindly be noted that the guidelines specifically states that the MISP or its associate companies shall not receive directly or indirectly from the insurer any fees, charges, infrastructure expenses, advertising expenses, documentation charges, legal fees, advisory fees, or any other payment by whatever name called except as specified in the guidelines.”
Last month, the insurance regulator introduced a new distribution channel called MISP to increase the sales of motor insurance policies. Insurance companies have appointed automobile dealers as their intermediaries to distribute motor insurance policies.
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.