Motor insurance is one of the integral vertical of the insurance industry. It stands as a forte for most of the insurance providers in India. Its huge payouts manifest the significant contribution in total share of the insurance industry in India’s GDP. Taking into consideration this massive monetary swapping in the motor insurance arena, Insurance Regulatory and Development Authority of India (IRDAI) has taken a much-needed step to bring in the clarity in the entire process of motor insurance.
IRDAI has now all set to fetch the transparency in the vehicle insurance. IRDAI has set up a seven-member committee to suggest and find the ways to introduce clarity in the payouts made to the auto dealers by the insurers for getting motor insurance business. This renowned and newly formed committee to be headed by a senior official of Insurance Regulatory and Development Authority of India will comprise members from insurance companies and the auto industry.
IRDAI has clearly stated the agenda behind setting up this committee while unveiling the news to national media. As said by IRDAI, the panel will study the “existing practices in the industry on the payouts (called in different names like infrastructure expenses etc.) made to the motor dealers on motor insurance business ” and also “examine the deviations from the existing norms”. It has also been asked to align with the Insurance Act, regulations, guidelines on the provisions for expenses of management, and outsourcing, among others.
This panel is supposed to design a standard format for agreements between insurers and car dealers to bring in transparency and uniformity on outsourcing and recommendations on draft guidelines. However, other existing terms are also being referred to and reviewed by the committee. This committee is asked to submit the report within two months.
Earlier in August, the Finance Ministry had said it had issued summons to 16 insurance companies and was investigating the agreement between car manufacturers and insurers for wrongfully availing CENVAT credit in the range of Rs 1,200 to Rs 2,500 crore. The Chennai Zonal Unit of the Directorate General of Central Excise Intelligence had been conducting an investigation under summons against 16 insurance companies.
As per the investigation, Preferred Car Insurance Companies (PICs) are getting stronger. Car manufacturer enters into an agreement with the insurance companies for appointing them Preferred Car Insurance Companies and instruct their car dealers to sell their insurance policies to PICs only.
Nevertheless, IRDAI, as per its regulations, does not allow any person other than insurance agents and insurance brokers, to sell vehicle insurance policies.