The Insurance Regulatory and Development Authority of India aims to increase transparency and reduce dealer commissions by introducing new platforms and caps, potentially transforming how consumers purchase motor insurance at showrooms.
Indian motor insurance buyers may soon see a shift in how policies are sold at showrooms, after the country’s regulator proposed a clampdown on the commissions earned by dealers and dealer-linked intermediaries.
According to a consultation paper from the Insurance Regulatory and Development Authority of India, motor insurance distribution has become one of the industry’s richest commission lines, despite the product being relatively straightforward and, in the case of third-party cover, compulsory. The regulator said distributors earned almost ₹7,050 crore in commission from ₹29,000 crore of motor insurance premium in the year to March 2025, with the average payout rate reaching 24%.
The paper also highlighted how quickly intermediary earnings have outpaced premium growth. Between fiscal 2023 and fiscal 2025, motor insurance premiums rose by about 34%, while commissions surged by nearly 259%. In the same period, the average commission rate on motor business written through brokers climbed from 9% to 25%. Even commissions on regulated third-party motor cover increased sharply, rising from 4.3% of premium to 22%.
The largest payouts are concentrated at the point of sale. Original equipment manufacturer brokers and motor insurance service providers, which include vehicle dealers, account for about 30% of motor insurance business across new and used vehicles, according to the consultation paper. For new cars, OEM brokers earn an average commission of 27%, while motor insurance service providers earn about 38%. On older vehicles brought in for servicing, the latter still collect an average commission of 12%.
To narrow that gap, the regulator has proposed making motor insurance available on Market Infrastructure Institution platforms such as Bima Sugam, which is expected to go live within the next four to six months. Buyers of new vehicles would have to be shown a clear option to purchase cover through the platform, including a QR code at the showroom, and be made aware that they can buy elsewhere rather than through the dealer. The proposal also seeks to cap platform fees for not-for-profit platforms at 5% of premium.
The broader aim is to reduce dependence on dealer-led sales, which the regulator says can obscure the true economics of a policy. In its paper, the regulator described motor insurance as a case where limited transparency has helped sustain unusually high commissions, even though the market is already familiar to consumers and third-party cover is mandatory. Livemint reported that the reforms are intended to make motor insurance more transparent, more efficient and easier to buy digitally.
IRDAI is also proposing a reset of commissions on mandatory third-party motor insurance and other easy-to-sell cover. Under the draft changes, commission on third-party insurance for new vehicles would be nil for distribution entities and 2.5% for agents, while own-damage and other add-ons would be capped at between 5% and 15%, depending on the sales channel and the age of the vehicle. Business Standard reported earlier this year that IRDAI had already approved the Bima Sugam framework as a broad insurance marketplace designed to let customers compare and buy policies across life, health and general insurance, a plan that now appears central to the regulator’s push to curb costly intermediaries.
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