An IRDAI-appointed committee has recommended that buyers of vehicles make separate payments for the vehicles and the related motor insurance premium. The panel suggests that the premium be paid to the insurance company directly, instead of through the Motor Insurance Service Provider (MISP).
A MISP is an automobile dealer appointed by the insurer or the insurance intermediary to distribute and/ or service motor insurance policies of automotive vehicles sold through it.
The committee says that under the present system, there is a lack of transparency about the insurance premium when the customer buys the vehicle through the automobile dealer and makes the payment through one single cheque.
“The customer does not know the insurance premium being paid as it is subsumed in the cost of the vehicle,” reported Press Trust of India quoting the committee.
“The customer may not be aware of the coverage options and discounts available in the process. The customer also cannot negotiate with the MISP to get the best coverage at the optimal price.”
The committee recommended, “The MISP shall not collect the insurance premium amount in its own account and then transfer the same to the insurance company.”
According to the report, motor insurance business generated by MISPs constitutes around 25% of the total motor insurance business.
The committee says that there is a need to develop and strengthen the regulatory framework and supervision activity for this distribution channel.