IRDA has issued a new regulation, bringing to an end the old practice of general insurance companies paying extra commission to automobile distributors for selling their policies.
Insurance Regulatory & Development Authority has capped payments by insurers to agents and dealers at 19.5% for cars and 22.5% for two-wheelers and brought them under its purview as motor insurance service providers (MISPs) starting this month, a move that is expected to bring down claims ratio.
“The implementation is on way and we have to see the impact of that entire dealership comes under the regulatory supervision,” said an insurance company executive who requested not to be named. “There were payouts happening in other forms, to dealers and to brokers, which has come down now to one commission to dealers.” These dealers were outside Irda’s regulation for so long.
With Irda’s regulations, they have been now structured and brought under the regulator’s ambit. They can choose to work with brokers or with insurance companies, but under the regulator’s supervision.
Insurers said the development will help the industry in better claims management and reducing expenses, which were paid earlier as outsourcing expenses.
“We feel that this will help us in bringing down the claims ratio,” he had said after announcing second quarter results of the company. “Second, payments, which are made to dealers, which are little on a higher side and now reduced and standardised. So the outgo for the company will also come down,” New India Chairman, G Srinivasan said.