The committee formed by the insurance regulator to review the motor insurance service provider (MISP) guidelines has suggested that automotive dealers can be considered as of one of the distribution channels for soliciting motor insurance business. They may work as insurance intermediaries in much the same way as insurance brokers, but must solicit motor insurance business only.
They may also choose to become sub-brokers or sub-agents and work for a broker or a corporate agent respectively. And the option to become a separate distribution channel or sub-broker should be left with the automotive dealer. If they decide to become a distribution channel, they have to mandatorily sign agreements with insurance companies, but cannot collect premiums. And they have to provide access to consumers to make direct online payment to the insurer.
In the motor insurance business, business sourced by MISPs through brokers and insurers make up for 25 per cent of the total motor insurance business or 11.25 per cent of the overall general insurance business.
The committee has also suggested amendments in the MISP guidelines if automotive dealers get considered as distribution channels of insurance companies. It has suggested that a MISP can be sponsored by an insurance intermediary and any one or more insurance company at the same time. “This will allow the MISP to offer motor insurance policies to customers of those insurance companies who are not on the panel of the insurance intermediaries by entering into a tie-up with them”, the committee said. Also, if a MISP is sponsored by an insurance intermediary, then it has to deal with all insurers and its application programming interface (API) should reflect this.
While guidelines say that MISPs should not directly or indirectly interfere in the determination of premiums, but the committee findings suggested that insurance intermediaries have created an electronic platform/ portal through which the motor insurance policies are solicited and renewed. The insurers provide the premium rates, discounts based on the make/ model of vehicle, geography and various other parameters and the intermediaries upload such details to the portal which then the MISP can access and solicit business.
And, it was observed by the committee that the premium rates appear same across all insurance companies for the same make/ model/ geography of the vehicle, which is against policyholder’s interest. Hence the committee has recommended that all the insurance companies may be directed either to develop a portal/app or use the existing electronic/e-commerce platform through which all motor insurance policies will be issued.
The committee has further said, the commission rates across all intermediaries, including the MISPs will be same and insurance companies can be asked to disclose premiums they have received from various distribution channels with the corresponding commissions paid and also show the rewards payments made. “An annual audit of the books of accounts of the insurers or the insurance intermediaries, depending on who has sponsored the MISP, be undertaken by any of the professional audit firms”, the committee said.
Since there is a conflict of interest in MISPs soliciting motor policies and service claims, the committee has said, they have to mandatorily disclose to the customer the remuneration and reward that he gets from the insurance company or the insurance intermediary. Furthermore, in case of cashless settlement, the policyholder will sign off on the estimate of the automotive dealer, giving the breakup of the parts used and the labour cost, which then will be given to the insurer and the surveyor. “Before the final settlement, the insured shall also sign on the final bills giving the break-up of the parts and labour”, the committee said.
And, the original equipment manufacturers (OEMs) or the insurance intermediary should not interfere directly or indirectly in the motor insurance claims of the policyholder other than submission of documents and follow up with insurance company for final decision.They have also recommended that OEMs should be brought under the definition of MISPs and they too should be subjected to all the provisions of MISP guidelines in the same manner as automotive dealers.