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The Insurance Regulatory and Development Authority of India (IRDAI) has issued guidelines that will allow car dealers to become Motor Insurance Service Providers (MISP) and offer the policies of multiple general insurers, says Sanjay Kumar Singh.
Illustration: Dominic Xavier/Rediff.com
Until recently, when you bought a car, you passively accepted whichever general insurer's motor insurance policy the dealer sold to you.
In the process, you could be sold a policy that was more expensive, or whose features were not the best for you, and so on.
That may change now.
The Insurance Regulatory and Development Authority of India (IRDAI) has issued guidelines that will allow car dealers to become Motor Insurance Service Providers (MISP) and offer the policies of multiple general insurers.
This initiative brings car dealers' insurance-selling activities within the regulator's purview.
"Motor dealers can get registered as Motor Insurance Service Providers, either under an intermediary or directly with one or more insurance companies. The exam, training, etc are similar to what is prescribed for a point of sales person (POSP). This will ensure better service for customers along with greater choice," says Milind Choudhari, chief financial officer, Bajaj Allianz General Insurance.
Adds Sharad Mathur, head of sales and distribution, SBI General Insurance: "Earlier, the auto dealer would sell the motor policies of insurers that were on the panel of the manufacturer. After becoming an MISP, an auto dealer or intermediary could potentially offer the policies of all the general insurers in the country."
The regulator will now be able to keep an eye on practices such as pushing the policies of the insurer which offers the highest commission to dealers.
With a wider range of options available to them, the onus will also be on customers to do their homework before entering the dealer's showroom.
Car buyers will have to alter their past behaviour and demand more choices, instead of accepting the policy the dealer foists on them.
"Buyers should consider the insurer's brand. They could go with a player that has a sizeable and reliable motor insurance business. They should also look up information on the insurer's claim settlement speed, available in the 'Disclosures' section of insurers' web sites," says Sanjay Dutta, chief, underwriting and claims, ICICI Lombard General Insurance.
Different players offer a variety of add-on features.
"See which general insurer's add-on features are better suited to your needs when making a choice," says Rahul Mohata, chief operating officer, 121policy.com.
He adds that once buyers have narrowed down their choices based on product features, they should do a price comparison.
The development of this channel could also facilitate risk-based pricing of products based on an individual's profile. If you use your car less, say, only on weekends, when the roads are less crowded, you may get a better pricing.
If you keep your car in a garage and not in the open, where it is more susceptible to damage, you may be charged a lower premium.
Telematics could be used, which can keep a track record of how many kilometres a person drives, whether his style of driving is steady or erratic, and so on.
Mathur is of the view that auto dealers, which constitute the biggest distribution channel after agents, will be able to support insurers in their effort to introduce risk-based pricing.
"Risk-based pricing by insurers requires customer-specific data. Customers visit a car dealer's showroom at least three or four times and spend several hours there. They will be more amenable to sharing personal data during their interactions, based on which they could be offered more attractive pricing," says Mathur.
The new guidelines will come into force in November.
