Insurers urge IRDAI crackdown against OEM-linked motor insurance brokers

Insurance companies are demanding an open architecture where customers can choose policies from multiple insurers without being limited by OEM brokers

General insurance officials are arguing with the Insurance Regulatory and Development Authority of India (IRDAI) to impose strict penalties on motor insurance service providers (MISPs) affiliated with vehicle manufacturers (OEMs) and dealers, according to a report by Moneycontrol. These providers are reportedly charging steep commissions of up to 53 per cent for new private car insurance policies, pushing up premiums for consumers.

 

According to the report, a senior insurance executive revealed that OEM-backed brokers often dictate both commissions and premium pricing, threatening to block insurers from their platforms if attempts are made to reduce premiums. Some even withhold vehicle sales if buyers opt for alternative insurance options. This practice forces consumers to buy policies at inflated rates, a situation detrimental to both insurers and policyholders.

Push for transparent and competitive insurance sales

Insurance companies are advocating for an open architecture where customers can choose policies from multiple insurers without being limited by OEM brokers. They propose real-time data-sharing to allow insurers to quote competitive prices, enhancing market transparency. The industry, which sees motor insurance account for 30 per cent of general insurance, wants IRDAI to regulate this sector more robustly. 

 

Earlier, the IRDAI had addressed this issue in an October meeting, with chairman Debasish Panda acknowledging the significant commissions charged by MISPs. Past penalties against entities like Maruti Insurance Brokers, which were fined for denying claims to non-compliant customers, highlight the regulator’s capacity for action.

 

Suggestions from General Insurance Council 

The General Insurance Council has suggested a range of reforms, including system integration for real-time pricing and policies that ensure customers see all quotes. Experts believe that aligning MISPs with IRDAI’s regulatory framework could curb these practices, ensuring fairer treatment for consumers.