Separate Payment of Vehicles and Insurance Policies
If you plan to buy a vehicle in India, it is mandatory by law to have the vehicle insured through a Motor Insurance Policy before you can take it on the road. The Motor Insurance Act, 1988, makes it compulsory for a vehicle buyer to have at least a third-party insurance policy. Until now, auto dealers have taken this opportunity to influence vehicle buyers to take insurance policy right when they buy the vehicle. The buyers pay the insurance policy’s premium amount and the vehicle’s total price through a single, one-time payment.
There has been a lengthy debate on whether the government should eradicate the process of a single payment for the vehicle and the motor insurance policy. However, to understand the government’s view, it is crucial to understand the process in detail.
The MISP Standpoint
Motor Insurance Service Provider (MISP) is an automobile dealer appointed by the insurance intermediary or the insurance company to promote and offer their vehicle insurance products to the customers buying a new vehicle. The current process includes a ‘Single Cheque’ system. The vehicle insurance policy is added to the vehicle’s actual price to offer the vehicle ready for the road.
In June 2019, the IRDAI set up a committee to review the ever controversial ‘Single Cheque’ system, arguing that it is not in the best of buyers’ interests and the policyholders. The committee suggested a lack of transparency in the process as the policyholders get no information about the policy’s benefits, discounts, features and the final amount that the MISPs pay to the insurance company. Furthermore, the committee added that the customers’ policy could not be negotiated or customized to suit the customers’ financial needs or lifestyle, forcing them to pay more and lose out on potential policy benefits.
The Suggestions and the Future Plans
After careful review, the committee submitted its results to the IRDAI. The suggestions or recommendations offered are:
- Facilitated by the MISP, the customer should be the one to pay the insurance company directly. This would allow the customers to know the actual price of the vehicle policy and bring transparency.
- There is a need to develop and strengthen the insurance policy’s distribution channel and the MISP to bring more flexibility for the customers. The government must create new regulatory frameworks and supervision policies to improve the current underperforming policies.
- The change in the definition of MISP to include Original Equipment Manufacturers (OEMs) into the regulatory framework. OEMs are the producers, manufacturers and assemblers of all types of vehicles. The committee recommended the change as they believe that OEMs influence automotive dealers tremendously and should be regulated.
- The framework should differentiate the two functions of servicing and sales to ensure that the customer understands the policy clearly and realizes the motor insurance policy’s benefits to its full potential.
The report submitted by the committee identified the importance of MISPs as the vehicle insurance policies sold through them constituted 25% of the total Motor Insurance Policies market and 11.25% of the total general policies market. Although MISPs are vital in easing the process of buying motor insurance policies, customers must be the ones to decide which motor insurance policy to buy and how much they are willing to pay for it. As there are numerous motor insurance policies to choose from, prior research is always wise to buy the policy from an experienced and innovative insurance broker.
PINC Insurance is a platform that focuses on comprehensive motor insurance policies that are transparent, flexible and highly customizable according to the vehicle and policyholder’s needs. Adhering to the present IRDAI guidelines, the motor insurance policies offered by PINC Insurance offer the best-in-class features and a seamless post-sales experience. You can visit PINC Insurance to compare and buy the best motor insurance policy for getting your vehicle ready for the road.