Regulator Targets Dealership Markups With Direct Digital Motor Cover Framework The insurance regulator has proposed a major overhaul for motor insurance, capping commissions and mandating direct platform options like Bima Sugam at auto dealerships. Purchasing a motor insurance policy directly from an automobile showroom may soon cease to be an expensive obligation for vehicle buyers. The Insurance Regulatory and Development Authority of India (IRDAI) has drafted a comprehensive regulatory overhaul aimed at restructuring the vehicle insurance purchasing journey. Under the newly proposed framework, the regulator intends to break the near-monopoly of auto dealerships by mandating accessible digital purchasing alternatives such as the non-profit Bima Sugam platform. In tandem with curbing distribution payouts on mandatory third-party policies, the proposals aim to improve premium pricing transparency and eliminate aggressive sales tactics. Industry metrics reveal that while total motor insurance premium collections expanded by 34 percent between FY23 and FY25, distribution commissions surged by an astonishing 259 percent over the identical timeframe. Commission Imbalances Across Distribution Channels During FY25, the average commission paid across the motor insurance spectrum stood at approximately 24 percent, with individual payouts fluctuating between 13 percent and 50 percent. Original Equipment Manufacturer (OEM) brokers alongside Motor Insurance Service Providers (MISPs) commanded nearly 30 percent of the overall market volume. Together, these entities mobilized roughly Rs 29,000 crore in gross insurance premiums, generating an estimated Rs 7,050 crore in commission earnings. A granular breakdown shows that OEMs collected an average commission of 27 percent on new vehicle policies, whereas MISP entities earned up to 38 percent on new cars. Conversely, MISP commission earnings on pre-owned vehicles averaged merely 12 percent. The supervisory authority classified mandatory third-party policies for brand-new vehicles as zero-effort products, while designating own-damage and comprehensive insurance covers as low-effort products. Mandatory Digital Portals and Direct QR Integration According to the regulatory draft, motor insurance policies for both brand-new and used vehicles must be made readily available through open digital portals like Bima Sugam. Dealerships will be required to showcase this alternative clearly within their showroom premises, accompanied by prominent QR codes. This setup allows prospective buyers to compare offerings and purchase their chosen policy digitally, either while finalizing vehicle documentation at the desk or remotely from home. Dealership staff will be obligated to proactively inform prospective buyers about these direct digital channels. Operating costs on these non-profit portals will be strictly capped at no more than 5 percent of the policy premium, reducing customer dependency on proprietary dealership networks. Restructuring Dealership Intermediary Roles Auto dealerships fulfilling regulatory criteria will need to register formally as Insurance Distribution Entities (IDEs). Facilities unable to meet the stipulated baseline will have to operate either as a Point of Sales Person (PoSP) affiliated with a certified IDE or as an exclusive associate of a single insurance firm. The regulator has strictly prohibited volume-driven promotional structures, specifically performance-linked incentive bonuses that risk compromising consumer welfare. Eliminating these incentive models aims to remove the financial motivation that drives showrooms to steer buyers toward high-commission insurance packages. Cashless Repair Guarantees and Verification Safeguards To prevent dealership retaliation against vehicle owners who secure coverage externally, the new guidelines explicitly prohibit authorized workshops from rejecting cashless claims or repair work on vehicles insured outside the showroom network. To safeguard policy integrity, the buyer's registered mobile number will be tied directly to the Policy Issuance Request (PIR). This contact detail will be validated against the national VAHAN vehicle registry, generating an immediate electronic confirmation message for the consumer to ensure complete transparency throughout the issuance procedure. Prospects for Lower Third-Party Premium Costs Commissions tied to mandatory third-party liability insurance previously climbed from 4.3 percent to 22 percent. IRDAI plans to drastically rein in these payouts, a move expected to reduce the initial acquisition costs for motorists registering a new vehicle. All these proposed adjustments currently remain in the consultation phase and will be evaluated against stakeholder feedback before final regulatory notification. What this means for you Buyers purchasing new cars or two-wheelers will gain substantial flexibility and immediate cost savings under the proposed insurance norms. • Direct Price Relief: Capping third-party commissions and restricting platform fees to 5 percent on Bima Sugam will trim overall policy premiums. Buyers can expect notable savings on upfront on-road acquisition expenses when registering new automobiles. • Freedom of Selection: Showroom QR codes will allow customers to choose and purchase cover from any preferred insurer. Dealership sales personnel will no longer be able to force customers into pre-selected high-cost policies. • Guaranteed Cashless Repairs: Authorized service centers cannot refuse cashless claim settlements simply because the insurance was bought outside. Policyholders will receive full repair support irrespective of where the cover was purchased. • Protection Against Fraud: Linking customer contact details with the official VAHAN portal ensures verification via instant SMS updates. This safeguard eliminates the risk of inaccurate records or counterfeit policy issuances. Why this happened The regulatory intervention was triggered by an unchecked escalation in showroom commissions and monopolistic sales practices that inflated vehicle insurance premiums. • Unbalanced Commission Growth: Between FY23 and FY25, motor premiums grew by 34 percent while distribution commissions leaped by 259 percent. This widening mismatch proved that high sales payouts were inflating the ultimate price paid by policyholders. • Dealership Sales Monopoly: Intermediaries and auto dealers were pocketing up to 38 percent in commissions on new vehicle policies, incentivizing them to withhold outside options from buyers. The supervisory body determined that this showroom leverage required direct structural intervention. • Eliminating Zero-Effort Payouts: Payouts on mandatory third-party liability policies had climbed to 22 percent despite the product demanding minimal sales effort. Introducing direct digital avenues like Bima Sugam aims to cut excessive distribution friction and pass savings back to motorists. Questions & Answers 1. How will IRDAI's proposed rules affect vehicle buyers? Vehicle buyers will be able to select insurance digitally via QR codes and could see lower policy costs as third-party commissions are reduced. 2. How will the Bima Sugam platform be accessible at auto showrooms? Dealerships will be required to display QR codes prominently, allowing customers to compare and purchase policies directly online from the showroom floor. 3. Can a dealer refuse cashless repairs if the policy was purchased externally? No, the proposed guidelines mandate that authorized dealerships and repair workshops cannot deny cashless claim servicing to outside policyholders. 4. By how much did third-party motor insurance commissions increase? Commissions paid on mandatory third-party motor insurance covers surged from 4.3 percent to 22 percent before this proposal to cap them. 5. Are these motor insurance rules currently enforceable? No, these measures are currently draft consultation proposals and will undergo stakeholder review before being officially notified. https://trendkia.com/en/auto/vahana-bima-men-dilaron-ke-unche-kamishana-para-lagegi-lagama-niyamaka-ne-taiyara-kiya-naya-masauda-37972 TrendKia — Har trend, sabse pehle.