Auto makers under scanner for forceful sale of motor insurance policies to customers

The insurance regulator is looking closely into the allegations of auto-makers forcefully selling motor policies to customers at the time of a vehicle's sale. There have been complaints filed with the competition watchdog against the push-tactics used by some of the automobile firms for selling motor policies.

This could come in as a relief to car/bike buyers who have faced sales representatives making the purchase of their pre-set motor insurance as a precondition for vehicle purchase. This restricts buyers from accessing the array of insurance products available in the market and looking at the product features before making a purchase decision.

According to the law, motor third-party insurance is mandatory for all vehicles running on Indian roads. These products are usually purchased from the same dealer from where an individual buys his car or bike.

“Because the auto companies have the bargaining power, they have been pushing consumers to buy specific insurance sold by them. There have been instances where a motor insurance product is sold at a higher premium. This is now being scrutinised,” said a senior official.

To deal with this, the Insurance Regulatory and Development Authority of India (IRDAI), is cracking down on the unauthorised sale of motor insurance policies by service providers.

In the past, there were multiple instances of Original Equipment Manufacturers (OEMs) that were dictating terms to dealers on the insurance being sold, but it is expected to come under control.

IRDAI, in an earlier circular, said that no motor insurance service providers (MISP) or insurance intermediary can enter into an agreement with the OEM that has an influence or bearing on the sale of motor insurance policies.

However, there have been cases where auto makers have mandated the policyholders to buy motor policies only from them. This in turn pushes up the vehicle price leading to impact on sales.

While there are clear rules prohibiting auto makers from forceful sale of motor policies, recent violations show that the customer's options are being limited. This is a clear anti-competitive practice that is now being probed.

With multiple such cases being reported over the last few quarters, the insurance regulator will look into the matter. It is likely that insurance intermediaries and insurance companies working with such auto makers will also be called in for discussions.

Those insurance entities found of indulging in anti-competitive practices will be penalised.