The proposals are part of IRDAI’s September 2026 consultation paper, Recalibrating Economics of Insurance Distribution, Part 1: Distribution Reforms.
These are proposals and not final regulations.
More choice when buying motor insurance
IRDAI has proposed that Market Infrastructure Institutions (MIIs) should facilitate digital distribution of insurance products, including motor insurance. The proposed framework envisages customers being able to use such platforms for activities including product discovery, comparison and purchase.
For new vehicles, the consultation paper proposes that the motor dealer should prominently display the option of purchasing insurance through the MII platform, including through a QR code, and inform the customer about this option.
Dealer should not restrict the customer’s choice of insurer
The paper proposes safeguards around arrangements between automobile dealers, original equipment manufacturers (OEMs) and insurance distribution entities.
For motor insurance distribution, the proposed framework seeks to ensure that the customer’s choice of insurer is not restricted through arrangements between the dealer and insurer or through other practices that work against the interests of policyholders.
The paper also proposes that eligible motor dealers can operate as Insurance Distribution Entities (IDEs), while other dealers may operate through permitted distribution structures.
Cashless repair should not depend on where you bought the policy
One of the specific proposals is that a motor dealer should not deny a policyholder cashless repair merely because the policyholder did not purchase the motor insurance policy through that dealer.
This is a direct policyholder-facing proposal in the consultation paper and, if retained in the final framework, would separate the choice of insurance distribution channel from access to the dealer’s cashless repair facility.
Changes proposed to dealer-linked incentives
IRDAI has proposed restrictions on arrangements involving motor dealers and OEMs where these could adversely affect policyholder interests.
The consultation paper also proposes that distribution arrangements and incentives should not create conflicts that influence the customer’s choice of insurance product or insurer.
The broader objective is to align distributor remuneration with the nature of the product and the effort involved in selling and servicing it.
Proposed commission limits for motor insurance
IRDAI has proposed specific commission limits for motor insurance under its proposed commission framework.
For distribution entities, the proposed maximum commission is:
- New-vehicle third-party motor insurance: Nil
- New-vehicle own-damage/personal accident/legal liability cover: 5%
Different limits have been proposed for agents and associates.
These are proposed commission ceilings and not current applicable rates. A reduction in distributor commission also does not by itself mean that the premium paid by a customer will fall by the same amount.
Digital route for existing vehicles too
The proposed MII framework is not limited to insurance purchased with a new vehicle. IRDAI’s proposal envisages digital infrastructure being available for motor insurance more broadly, including for existing vehicles.
The objective is to create a more transparent, digital and customer-driven distribution process rather than relying only on traditional intermediary-led channels.
What it means for a motor insurance policyholder
If the proposals are implemented in their current or a modified form, the changes most directly relevant to customers would be:
- Greater visibility of a digital route to buy motor insurance
- More scope to compare and choose an insurer
- Safeguards against distribution arrangements restricting customer choice
- Protection against denial of cashless repair solely because insurance was purchased through another channel
- Tighter controls around dealer-linked incentives
- Lower proposed commission limits for certain motor insurance products
However, these proposals do not mean that an existing motor insurance policy will automatically become cheaper or that its premium will be revised. The consultation paper is primarily proposing changes to the distribution and economics of selling insurance.
IRDAI has invited stakeholder comments on the consultation paper, and the final regulatory framework could therefore differ from the proposals.