Section 12 of the distribution consultation paper puts motor insurance, India's largest retail line, through three direct changes. Dealers would have to prominently display the option of buying motor insurance through the Market Infrastructure Institution platform, including via a QR code, and inform every new-vehicle customer about it. A dealer could not deny cashless repair to a policyholder simply because the policy was not bought through that dealer. And proposed commission limits would set nil commission for distribution entities on new-vehicle third-party cover and a maximum of 5 percent on own damage, personal accident and legal liability cover. Comments close on October 25, 2026.
Context: why motor is the paper's prime example
IRDAI calls third-party cover on new vehicles a nil-effort product, because vehicle registration itself requires proof of insurance, and it describes motor as a prime example of lack of transparency driving high commissions even though part of the premium is mandatory and price-regulated. The draft notes average motor commissions of about 24 percent, ranging from 13 to 50 percent. OEM brokers and motor insurance service providers hold around 30 percent share across new and old vehicles, earned an average commission of about 24 percent, and collected roughly Rs 7,050 crore in commissions on about Rs 29,000 crore of motor premium in FY25. The paper also proposes restricting dealer, OEM and insurer arrangements, including service-level agreements and performance-linked incentives that reward dealers for pushing particular policies.
Implication: who gains and who loses
- Car and two-wheeler buyers: a formal digital comparison route enters the showroom, and the threat of losing cashless service for buying elsewhere goes away.
- Dealers: insurance becomes a smaller fee stream, which raises the price of the discount that free or cheap insurance currently cross-subsidises in showroom negotiations.
- Insurers: direct and marketplace channels gain ground on the mandatory third-party book, the most predictable premium there is.
Action: what to do at the showroom
Ask for the third-party and own-damage components separately before agreeing to a bundled quote. Scan the QR option once it exists and compare the same IDV and add-ons against the dealer quote. Decline add-ons you do not understand; none of them are compulsory. Keep the policy documents: cashless repair at any network garage cannot be conditioned on where you bought the policy, and if a dealer refuses service on that ground, that is a grievance for the insurer first and the IRDAI Bima Bharosa portal next. The proposals are not yet law, so keep receipts and records while the consultation runs to October 25.