India’s insurance regulator, IRDAI, proposes sweeping reforms to make motor insurance more transparent, reduce dealer dominance, and promote direct consumer access through digital markets, potentially reshaping industry practices.
India’s insurance regulator is preparing a broad rethink of how motor cover is sold, priced and paid for, in a move that could reduce dealer dominance and give vehicle buyers more direct access to policy options. The Insurance Regulatory and Development Authority of India, or IRDAI, has floated proposals that would push motor insurance towards digital platforms, tighten commission structures and make it harder for dealers to bundle insurance in ways that limit consumer choice, according to the consultation paper and reports on the draft.
The centrepiece of the proposal is a shift in distribution. Livemint reported that IRDAI wants new and used vehicle insurance products made available through digital market infrastructure platforms, including the Bima Sugam model now being developed. The aim is to let buyers compare cover more easily rather than relying on the dealer at the point of sale. The draft also envisages limits on what such not-for-profit platforms can charge, with a fee cap of 5% of premium to recover costs.
IRDAI is also questioning whether the current commission structure is justified. In its paper, the regulator said motor insurance commissions can range from 13% to 50%, with an average of about 24%. For original equipment manufacturer brokers and motor insurance service providers, it put the average commission at roughly 24%, rising to as much as 31% in some cases. The regulator said these channels collected about ₹29,000 crore in premium in FY25, with around ₹7,050 crore paid out in commission. Business Standard reported that the wider consultation also seeks lower expense limits for insurers, part of a broader effort to curb sales costs and mis-selling.
The draft would also change what dealers must tell customers. Vehicle sellers would have to display the digital platform option and a QR code clearly, so buyers know they are not restricted to the policy offered on the showroom floor. In addition, IRDAI wants dealers to be barred from refusing cashless repairs simply because the customer bought insurance elsewhere, a protection that would matter most for policyholders who choose a different insurer after purchasing a car or bike.
The proposals reach beyond new vehicles. IRDAI has raised concerns about insurance sold alongside vehicle loans from banks and non-banking financial companies, noting commission levels of around 16% in such bundled arrangements. It has also questioned the economics of commissions on older vehicles, where dealers may already have repair and servicing facilities but still receive average commissions of about 12% through motor insurance service providers. According to National Press, the draft could eventually replace the current MISP framework with a broader insurance distribution entity regime and sharply reduce first-year commissions across the industry.
For now, however, nothing has changed in practice. The paper, titled “Recalibrating Economics of Insurance Distribution”, is a consultation document rather than a final rule, and comments remain open until 25 October 2026. Business Standard and other reports say the regulator is looking to phase in any overhaul later, rather than immediately. Even so, the direction is clear: IRDAI wants motor insurance to become more transparent, less dependent on dealer-led sales and more closely aligned with the actual cost of service.
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