Industry Odisha Bureau, Oct 17: Motor insurers want third-party premium deregulation, named-driver policies and an end to knock-for-knock claims pacts. They argue a proposed 5% commission cap alone may not cut distribution costs.
Motor insurers want India’s insurance regulator to let them price third-party cover by risk. The demand features in responses to the Insurance Regulatory and Development Authority of India (IRDAI). They also want knock-for-knock claims pacts scrapped and named-driver policies introduced.
The submissions respond to IRDAI’s consultation paper on insurance distribution reforms. Their core argument is that commission caps alone may not lower distribution costs. The proposals remain recommendations, not regulatory decisions.
Some industry participants said automobile manufacturers and dealers shape commissions, discounts and repair costs. That influence could weaken curbs on intermediary pay, people aware of the matter said.
IRDAI has proposed a 5% cap on certain motor insurance commissions. One submission recalled that dealer commissions were capped at 10% before 2017. Insurers still made extra payments through overriders and marketing costs, it said.
It warned dealers could offset a lower cap through higher repair bills. Similar practices followed the 2017 guidelines, the submission added. Such shifts are hard to track because repair costs sit outside commission rules.
Another response urged IRDAI to tackle motor insurance’s underlying economics instead. It singled out third-party pricing, rather than distribution pay-outs alone.
The chief executive of a large general insurer backed full deregulation. Insurers, he argued, should set third-party premiums according to risk. That would let them charge risk-appropriate rates for high-risk cover. Own-damage cover, which protects the insured vehicle, is already priced this way.
Third-party cover, by contrast, pays for harm caused to others. Risk-based pricing could cut costs for safer drivers but raise them for riskier ones. That raises affordability questions for compulsory cover.
A Motor Vehicles Act provision envisaged standard premiums for liability up to ₹10 lakh. Higher liabilities would have attracted extra premiums. That provision was never implemented.
Another submission seeks an end to knock-for-knock agreements. Under these pacts, each insurer settles own-damage claims with its own policyholder. It does not seek recovery from the at-fault party’s insurer.
Scrapping the pacts would let victims claim under the at-fault driver’s policy. Repair costs would fall on that driver’s third-party property-damage cover. The shift could raise claim sizes and complicate underwriting. Fault would also need to be established in each case.
One submission suggested a role for the General Insurance Council. The council could frame common rules on fault and dispute resolution. Online police reports and surveyor assessments could serve as evidence. Shared standards could reduce disputes between insurers over liability.
The final proposal targets who sits behind the wheel. Named-driver policies would tie cover to specified drivers. Customers could still choose unnamed-driver cover at a higher premium. Industry participants say this could discourage unauthorised driving. Families sharing one car would need to read policy terms carefully.
The proposals reflect a wider tension in India’s motor insurance market. Insurers want pricing freedom and leaner distribution costs. Policyholders need affordable compulsory cover and fair, efficient claims. IRDAI’s response will decide how that balance is struck.
