The Committee for Review (CfR) of Motor Insurance Service Provider (MISP) guidelines on January 18 submitted its report to the Insurance Regulatory and Development Authority of India (IRDAI).
In it, the CfR suggested that all automotive dealers may act as one of the distribution channels on a stand-alone basis. This would in turn solicit motor insurance business in a manner similar to insurance brokers.
Earlier in August 2017, IRDAI issued MISP guidelines with an aim to bring orderly conduct in the matter of distribution of motor insurance business through motor dealers.
After this, IRDAI set up the CFR in June 2020 to review the practices under the guidelines.
Who is an MISP?
MISP is an automobile dealer appointed by the insurer or the insurance intermediary to enable distribution or service motor insurance policies of automotive vehicles sold through it.
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The CFR in its submission noted the motor insurance business sourced by MISPs through brokers and insurers together constitutes around 25 percent of the total motor insurance business or around 11.25 percent of the overall general insurance business.
The panel was also held that there is a need to develop and strengthen the regulatory framework and supervision activities for this distribution channel, given the potential opportunity for motor insurance
business through the MISPs.
It also said that the registration, operational and code of conduct requirements across similar intermediaries remain the same.
What are some of the suggestions the CfR made?
The committee said in its report that in order to develop the MISP as a robust channel of distribution the following suggestions would need to be considered:
-automotive dealers as one of the distribution channel on stand-alone basis soliciting motor insurance business similar to insurance broker representing the customer with conditions like:
-Mandatorily having an agreement with all insurers
-It would be prohibited from collecting premium
-Provide access to customers to make a direct online payment to the insurer.
“Alternatively, the automotive dealer may become a sub-broker or a sub-agent and work for a broker or a corporate agent, respectively,” it added.
On how to issuing and modification of policies, the committee said that all insurance companies may be directed to develop a portal or app. It may also use the existing electronic or e-commerce platform through which insurance policies shall be issued.
“The electronic platform or portal shall have no functionality or mechanism built into it that can alter, modify or change the premium quoted by the insurance company,” the committee said.
The panel in its suggestions said that the original equipment manufacturer (OEM) should be brought into the regulatory ambit by including OEM in the definition of MISP.
“The OEMs shall be equal to MISP and will be subject to all the provisions of MISP Guidelines. They shall give the list of their authorized-dealers and authorized sub-dealers to Irdai and that list can be uploaded at IIB (Insurance Information Bureau) for generating unique identification numbers of the MISP,” the report said.
On the issue of premium payment, CfR suggested the amount must be done through a single check and the customer should make payment to the insurance company directly, which is facilitated by the MISP.
The MISP should not collect the insurance premium amount in its
own account and then transfer the same to the insurance company, it added.