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Thursday, December 2, 2021

Rules can be changed for those buying a new vehicle, two checks will have to be given for vehicle cost and insurance premium

Irda issued the MISP Guidelines in 2017 with an intention to rationalize the process.

Those purchasing a new vehicle may have to pay the cost of the vehicle and insurance premium through separate checks. If the Insurance Regulatory and Development Authority (IRDA) accepts the recommendation of a committee to review the Motor Insurance Service Provider (MISP) guidelines, then this arrangement may apply. IRDA had issued the MISP Guidelines in 2017 with an intention to rationalize the process.

Also, its purpose was to bring the vehicle insurance sold by the vehicle dealers under the provisions of the Insurance Act-1938. MISP means a vehicle dealer appointed by an insurance company or an insurance intermediary unit, which also provides insurance services for vehicles it sells.

Committee was formed in 2019

In 2019, the regulator constituted a committee to review the MISP guidelines. The committee has made several recommendations in its report for the systematic operation of motor insurance business through MISP. The committee also reviewed the current practice of taking premium payments from customers while making motor vehicle insurance policy, among other issues.

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Lack of transparency in premium costs

The committee said that in the current system, there is a lack of transparency about the cost of paying insurance premium for the first time a customer buys a vehicle from a vehicle dealer. In this, payment is made by a single check by the customer. MISPs pay their accounts to the insurance company, in which case the customer does not know how much the insurance premium paid by them is because it is included in the cost of the vehicle itself.

The committee has said that the lack of transparency is not in the interest of the policyholder, as the customer does not know the true cost of insurance. Also, the customer does not get information about coverage options and concessions etc. Therefore, the committee recommended that the customer should pay directly to the insurance company while purchasing a new vehicle. MISP will not collect the insurance amount from the customer in his account and send it to the insurance company. The committee has also recommended that the MISP must disclose to the customer the remuneration and rewards that it receives from the insurance company or insurance intermediary.

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