IRDA forms panel for transparency in motor insurance

Insurance regulator IRDAI today set up a seven-member committee to suggest ways to bring transparency in payouts made to the auto dealers by the insurers for getting motor insurance business.
The committee to be headed by a senior official of Insurance Regulatory and Development Authority of India (IRDAI) will comprise members from insurance companies and auto industry.
The IRDAI said it "proposes to bring clarity and transparency in payouts made to the auto dealers by the insurers for getting motor insurance business" while announcing setting up of the panel.
The panel will study the "existing practices in the industry on the payouts (called in different names like infrastructure expenses etc) made to the motor dealers on motor insurance business" and also "examine the deviations from the existing norms".

It has also been asked to align with the Insurance Act, regulations, guidelines on the provisions for expenses of management, and outsourcing, among others.
To bring transparency and uniformity in such activities, to design standard formats for agreements (between insurers and dealers) on outsourcing and recommendations on draft guidelines, are among others terms of reference for the committee.

The committee has been "advised" to submit its report within two months.
Earlier in August, the Finance Ministry had said it had issued summons to 16 insurance companies and was investigating the agreement between car manufacturers and insurers for wrongfully availing CENVAT credit in the range of Rs 1,200 to Rs 2,500 crore.

The Chennai Zonal Unit of the Directorate General of Central Excise Intelligence had been conducting investigation under summons against 16 insurance companies.
"During the course of investigation, it has been noticed that the car manufacturers enter into agreement with the Insurance Companies for appointing them as Preferred Car Insurance Companies (PICs) and instruct their car dealers to sell their insurance policies to PICs only.
"Such PICs pay commission on the value of the insurance policies to the car companies (in the range of 2-3 per cent) and the car dealers (in the range of 15-45 per cent)," the ministry had said.

The IRDAI regulations do not allow any person other than insurance agents and insurance brokers, to sell vehicle insurance policies.