IRDAI Expressed Concerns Over Rising Auto Insurance Commission

The Insurance Regulatory Development Authority of India (IRDAI) has recently expressed concerns over high commission payouts to motor insurance service providers (MISPs) during a meeting with leading executives from non-life insurance companies. The Insurance Regulatory and Development Authority of India (Irdai) revealed that commissions for new private car insurance policies ranged from 25% to 57%.

IRDAI stated that the automotive industry, which contributes 7.1% to India’s GDP, has spurred the growth of motor insurance, now comprising about 45% of general insurance business. Car dealers play a pivotal role as intermediaries, significantly impacting customer purchases of motor insurance.

At the meeting, IRDAI expressed that the upcoming Bima Sugam platform could help lower these commission rates and facilitate savings for policyholders. Set to launch in April 2025, Bima Sugam will serve as a comprehensive digital marketplace, allowing customers to compare offerings from various insurers, thereby fostering competition and transparency.

There have been ongoing complaints about MISPs pressuring customers to buy specific insurance policies at inflated prices. Reports indicate that some dealers have conditioned vehicle sales on the purchase of insurance from affiliated MISPs, raising regulatory concerns despite customers’ rights to choose their insurers.

In response to these issues, Irdai established a committee in 2019 to review MISP guidelines following numerous complaints of malpractice. The committee’s findings, presented in January 2021, revealed that many MISPs did not provide customers with a choice of motor insurance policies, prompting stricter oversight.

The regulator has previously taken punitive actions against violators, including a ₹3 crore fine on Maruti Insurance Broking for denying cashless claims to policyholders who did not buy insurance through linked MISPs. Similar penalties were imposed on Hero Insurance Broking and Toyota Tsusho Insurance Broker for breaching MISP guidelines.

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