IRDAI proposal could curb dealer-linked motor insurance commissions for new-car buyers
Draft motor-insurance rules would give new-vehicle buyers digital purchase options, cap platform fees at 5% of premium and restrict dealer practices around cashless repairs. The changes could reshape OEM, dealership and MISP insurance-distribution income.
What happened
IRDAI proposes digital insurance purchase options for new-vehicle buyers, lower commissions for mandatory motor cover, and tighter dealer distribution rules.
Key facts
- Motor insurance premiums grew approximately 34% between FY23 and FY25
- Motor insurance commissions increased approximately 259% between FY23 and FY25
- Average motor insurance commission rate was approximately 24% in FY25
- OEM brokers and MISPs accounted for approximately 30% of the market
- FY25 premiums generated by these distributors: approximately ₹29,000 crore
- FY25 commissions received: nearly ₹7,050 crore
- New-vehicle OEM broker average commission: 27%
- New-vehicle MISP average commission: 38%
- Old-vehicle MISP average commission: 12%
- Proposed platform-fee cap: 5% of premium
- Third-party commission average rose from 4.3% in FY23 to 22% in FY25
Why this matters
Strategic buyers should prioritize compliant embedded-insurance technology, insurer integrations and aftersales platforms that can replace dealer-led policy economics with lower-fee digital models.
What to watch
- Release of IRDAI's final motor-insurance regulations, implementation date and transition provisions.
- Final definition of platform fee, permissible commissions, MISP compensation and bundled-service charges.
- Requirements for insurer-neutral digital choice, customer consent, policy portability and disclosure at vehicle delivery.
- Dealer association, OEM, insurer and broker consultation responses or legal challenges.
- Monthly new-car insurance attachment rates, average first-year premium, commission disclosures and policy-renewal retention by channel.
- Changes in cashless repair-network rules and insurer agreements with authorized service centers.
- Quarterly commentary from auto dealers and OEMs on finance-and-insurance income, ancillary gross margin and insurer partnerships.
- Model dealership finance-and-insurance income separately from vehicle gross margin; identify listed dealer groups and OEMs with material insurance-distribution exposure.
- Expect OEMs and dealer networks to push extended warranties, maintenance plans, accessories, roadside assistance and subscription products to replace lost per-vehicle insurance income.
- Favor insurers, digital brokers and comparison platforms with direct-to-consumer acquisition, renewal capabilities and broad cashless-garage networks, subject to higher customer-acquisition costs.
- Watch for dealer consolidation: smaller outlets may struggle to absorb lower ancillary income, while large groups can negotiate insurer service fees and invest in digital policy journeys.
- Assess claims-repair effects: restrictions on dealer-linked cashless steering could redirect repair volumes toward insurer-preferred workshops and independent multi-brand body shops.
- Monitor whether insurers reduce new-car policy discounts or alter dealer incentives, potentially offsetting part of the consumer premium benefit.