Nonlife insurers may reduce their premiums in the ‘own damage’ segment by 5-20% for the existing and new customers of private and commercial vehicles as the new regulations of the IRDAI have led to a cut in the commission offered by them to auto dealers.
The reduction in premium is largely due to the IRDAI’s MISP (Motor Insurance Service Provider) circular which reduced the commission to auto dealers. Insurance regulator has capped distribution fees payable to auto dealers at 22.5 per cent for two-wheelers and 19.5 per cent for four-wheelers and sports utility vehicles (SUVs). Earlier, general insurers used to pay the distribution fees in the range of 30-40 per cent across the segment.
According to sources, almost all the general insurers, including New India Assurance, United India Assurance, Bajaj Allianz General Insurance, ICICI Lombard, Tata AIG and SBI General Insurance will revise their ‘own damage’ premiums on vehicles downward despite incurring higher claims.
Sharad Mathur, head of sales and distribution, SBI General Insurance, explained that as far as premiums are concerned, it is likely that industry might move towards risk-based pricing. Until now, premiums were largely formula-based across the country, but now we might witness premiums going down in the region where loss ratio is less or customers who drive safely.