In a bid to offer more choices to customers, regulator Insurance Regulatory and Development Authority of India (IRDAI) has allowed all general insurers to sell motor cover policies through auto dealer networks by offering differential pricing. The move, under the new guidelines will offer customers choices in terms of pricing apart from increase competition among insurers to offer best price to customers. Earlier, it was mandatory for a customer to buy automobile insurance from an insurer with whom the auto dealer already has an exclusive arrangement. Also, insurers were not allowed to offer differential pricing which would reward good customers and ensure higher premium for bad customers.

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An August 31 IRDAI circular recognized the role of auto dealers in distributing and servicing of motor policies along with a regulatory oversight over their activities connected to insurance. The new norms came after IRDAI set up a committee to study motor dealer payouts. The committee submitted its report in May last year. Based on the report and interactions with insurers and other stakeholders, IRDAI framed the new norms. United India Insurance, which gets 40 per cent of its total premium from motor insurance, thinks the new regulations will not affect its new business coming in through dealers.

"We've tie-ups with almost all major car dealers and this channel is responsible for around 15 per cent of our motor policies," United India director MN Sharma told PTI.

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When asked whether the new regulations will impact its new business coming in from auto dealers, he answered in the negative but he was quick to add that it may have some impact on the renewal premium income. The IRDAI has also allowed higher commission for the auto dealers which would be paid by the insurer. However, for own damage cover, the dealers will be paid 19.5 per cent for cars, and 22.5 per cent for two-wheeler covers.

"The new guidelines are good as they bring robustness to the sector as this segment is responsible for over 40 per cent of our premium income," ICICI Lombard managing director and chief executive Bhargav Dasgupta said.

On the provision of differential pricing, he said it is very crucial for the segment to become more business-worthy. A part of the industry feels that it is a landmark step by Irdai to bring auto dealers under its purview. Even as auto dealers have been doing this job for long, it is for the first time that their job is being recognised by the regulator in the form of the motor insurance service provider, Tapan Singhel, MD & CEO of Bajaj Allianz General Insurance said.

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At present, motor insurance contributes to around 50 per cent of its business mix and it expects this to continue, Manohar Bhat, Bajaj Allianz business head--motor said.

"Insurers who are not a part of auto networks so far, may also get an opportunity to sell their policies to the latter's customer. The new norms will also help them make use of underwriting principles to reward good customers," Sharad Mathur of SBI General said.

"Overall, this move will improve transparency within the system, which when coupled with some of the existing automated process for policy issuance and claims settlement, will make the environment more conducive for customers, auto dealers/intermediaries and customers alike," he said.

More importantly, this move is going to benefit customers in availing of cashless service as auto dealers will not discriminate between policyholders who have bought motor policies through them or otherwise, he argued.

Mathur said motor cover sold through auto dealers can expect a moderate rise in some places and a reduction in other places on the basis of risk and claims experience.

He further said differential pricing is unlikely to lead to a price war customers must be given efficient service that cannot be done without adequate pricing.

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