Heavy fines will be imposed on dealers selling products without MISP licence
Auto dealers who sell motor insurance policies to people without a valid Motor Insurance Service Provider (MISP) licence could now be penalised.
Insurance Regulatory and Development Authority of India (IRDAI) is cracking down on auto dealers that do not register. The penalty could be up to Rs five lakh.
This will be applicable to all dealers selling motor insurance at the time of purchase of a vehicle. Motor third-party insurance is mandatory for all vehicles while the own damage component is optional. Most dealers typically sell a comprehensive insurance package that includes third-party and own damage coverage.
“There are still many dealers who are selling products without proper registration. Penal action will be taken against such entities after inspections,” said a senior official.
Third party insurance provides coverage against liabilities of vehicle owners involved in accidents. Own damage insurance covers the vehicle against any external damages.
There are a total of 25,000 dealerships in India and an additional 15,000 dealers operating in the market.
IRDAI will also be sending a communication to the dealerships and individual dealers discouraging sale through unauthorised means.
IRDAI had earlier said no MISP or insurance intermediary can enter into an agreement with the Original Equipment Manufacturers (OEMs) that has influence or bearing on the sale of motor insurance policies.
While in the past, there were multiple instances of Original Equipment Manufacturers (OEMs) dictating terms to dealers on the insurance being sold, this will now be under control. Having a MISP registration will mean that these entities will be forced to offer an option of all insurance companies’ products to customers.
Apart from malpractices like dealers overcharging customers for insurance and passing on lesser premiums to the insurers, some companies had also complained of anti-competitive practices.Sources said at least 5 percent of dealers have been found offering single company insurance to customers leaving little choice for customers during vehicle purchase.