Page 54 - Insurance Times March 2017 Sample

Insurance sold

by car dealers

can be costly

I f you are buying a new car, buying insurance for it is they had bought the insurance elsewhere," said Kapil Mehta,
perhaps the last thing on your mind. Plus, the car
co-founder, SecureNow Insurance Broker Pvt. Ltd. This is not
dealer makes insurance purchase easy by bundling
unknown to the insurance regulator. It has in the past fined
the policy with the deal. But the policy from the
commissions to unlicensed car dealers for soliciting insurance.
dealer can be expensive and you may get a better insurers for overpaying intermediaries and paying
rate if you shop around.
We looked through some of the penalty orders issued by the
Dealer insurance can be costly insurance regulator to understand the extent of extra
For the insurer, a car dealer is a point of sale and the best payouts. One penalty order noted that the insurer was
placed to sell car insurance. Remember that third-party directly booking business through a car dealer and paying
insurance-which insures you against damages to a third up to 40% of premium towards commission and
infrastructure expenses. Another noted that an insurer had
person or property due to your car-is mandatory for all plying
vehicles, whereas the own damage cover-which insures your close to 400 motor dealers on its roll and none of them were
vehicle against theft or damage-is recommended. So, what licensed insurance intermediaries. The insurer had allotted
the dealer typically sells is a comprehensive car insurance intermediary codes to motor dealers and made payments
policy, consisting of these two covers. towards commission.

Given that third-party insurance is mandatory and that it is To address this issue, the Insurance Regulatory and
much easy for the dealer to sell the policy, the market practice Development Authority of India (IRDAI) had constituted a
has been to compensate dealers for the sale, even if they are committee in November 2015 to study the existing practices
not licensed insurance distributors. These pay-outs often get in payouts to motor dealers and bring transparency, among
passed on as infrastructure and marketing expenses. "Car other things. According to an official who worked on the
manufacturers, especially the big companies, run insurance report but didn't want to be named, it was submitted to
programmes where they tie up with the insurer and dictate the regulator about 6 months back.
aspects such as servicing and claims apart from premiums and
payouts that get passed on to the dealers in the form of What should you do?
various expenses," said Mahavir Chopra, director-health, life Start by asking the price of insurance. "It's important that
and strategic initiatives, Coverfox.com. "While some dealers show the cost of insurance as a separate cost head
manufacturers will enroll an insurance intermediary, others in the invoice, along with the insurer's name, so that the
negotiate directly with the insurer. The mark-up on the policy customer knows the cost of insurance and can shop in the
as decided, is passed on to dealers, who probably make more market," said Mehta.
money through the sale of insurance than they do through
selling cars," he added. The next step is to go online and compare policies. There
are many online portals which you can use to compare
Even though rules allow commission of up to 10% of the prices. In fact, the industry is already seeing cost conscious
premium (of own damage cover)-to be increased to 15% from customers actively seeking the online medium to compare
financial year (FY) 2018-insurers tend to overpay. "The overall and buy policies, said Pushan Mahapatra, managing director
payment to dealers or insurance intermediates who have a and chief executive officer, SBI General Insurance Co. Ltd.
tie-up with dealers or manufacturers can be as high as 40%. While you may not get a better rate from the same insurer,
For the customer, this means paying higher premium than if you can shop for a cheaper policy. (Source : Mint)

54 The Insurance Times, March 2017

Copyright@ The Insurance Times. 09883398055 / 09883380339