Regulator Curbs Fat Payouts To Auto Dealers For Motor Insurance
Regulator brings in uniform norms to curb arbitrary payouts by insurers.
Auto dealers will no longer get fat commissions on selling motor insurance.
That’s because the insurance regulator has capped the fees for selling motor covers and brought automobile dealers on a par with other distributors to bring uniformity and check arbitrary payouts by general insurers.
The maximum commission for selling a comprehensive motor insurance for two-wheelers is fixed at 17.5 percent. For other vehicles, it’s 15 percent, according to new guidelines issues by the regulator on Aug 2. Auto dealers also get the status of motor insurance service providers like brokers, agents and other intermediaries, said the another set of guidelines announced on Aug. 31.
Distributors will also be eligible for a reward of up to 30 percent of the maximum commission allowed, depending on the quality of service. The new rules came into effect today.
Motor dealers are the first point of contact for new buyers and insurers used to overly incentivise them by paying commissions as high as 40 percent to push their covers, R Chandrasekaran, secretary general at governing body General Insurance Council said. “This had to be curbed and by way of standardising the commission to all the motor insurance distribution channels, the regulator has actually reduced the scope of any such bias towards a particular insurer.”
Earlier, distributors earned a fixed commission of 10 percent of the own-damage premium and another 15 percent as reward, said Gurucharan Kodali, who runs Coastal Insurance Broking Agency in Hyderabad that specialises in motor policies.
Since most of the motor insurance business comes through their outlets, automobile dealers will choose to deal directly deal with insurers and not use the services of brokers. This will be a big hit for us as most of our business also happens through this channel.Gurucharan Kodali Of Coastal Insurance Broking Agency
Reward For Fourth-Year Renewals
The Insurance Regulatory and Development Authority has also added another 2.5 percent of the third-party premium to the commission for agents who get the policies renewed in the fourth year.
“It is a positive step from the regulator,” said Tapan Singhel, managing director and chief executive officer at Bajaj Allianz General Insurance. “This will encourage more renewals from the fourth year onwards as the rate of renewals comes down as the vehicle ages.”
The comprehensive cover includes both own damage and third-party insurance. Earlier, agents were paid only for own-damage. For standalone third-party insurance business, the regulator has fixed the fee at 2.5 percent.