IRDAI Presses for Transparency on Motor Insurance Commissions: What It Means for Premiums

The Insurance Regulatory and Development Authority of India (IRDAI) has flagged high commissions on motor insurance policies and called for more transparency around how insurers and intermediaries are paid, according to reporting by Team-BHP. For anyone who owns a car or two-wheeler, the practical point is this: commissions are already baked into every premium you pay, and a regulatory push for disclosure could change how those costs are shown to you, and possibly how much of your premium goes toward distribution rather than actual risk cover.

This isn't the first time motor insurance has drawn regulatory attention. Motor own-damage and third-party premiums are among the highest-volume, highest-commission products in Indian general insurance, sold through agents, brokers, bank branches and increasingly through car dealerships bundled with the vehicle purchase itself. When commissions run high, insurers have less room to price competitively or invest in claims service, and policyholders often can't tell how much of their premium is going toward the actual cover versus the sales channel that sold it to them.

This article walks through why commissions on motor insurance tend to run high, what a push for transparency could realistically mean for your premium and renewal experience, and what you should actually do the next time you buy or renew a car or two-wheeler policy.

Key takeaways

• IRDAI has called for more transparency on motor insurance commissions, according to Team-BHP's reporting, flagging that some commissions are unusually high.
• Commissions are already part of every motor premium you pay; the regulator's focus is on disclosure and possibly on curbing outsized payouts, not on inventing a new cost.
• Dealership-sold and bundled motor policies, common when buying a new car or two-wheeler, tend to carry higher commission structures than policies bought directly or through comparison platforms.
• Greater transparency could, over time, nudge premiums down for direct or online buyers, though any actual price impact will take time to show up.
• Nothing changes for policyholders immediately; no premium has been announced as being cut or capped as a direct result of this development.
• The most useful response for a borrower or vehicle owner right now is to start comparing motor insurance the way you'd compare a loan: by total cost, not just headline premium.

Why IRDAI is looking at motor insurance commissions

Motor insurance in India is sold through several channels: individual agents, corporate agents (including banks), insurance brokers, and increasingly the finance and insurance desk at car and two-wheeler dealerships. Each channel earns a commission or facilitation fee for placing the policy, and this cost is recovered from the premium the policyholder pays.

IRDAI already regulates how much insurers can spend on "expenses of management," a category that includes commissions, and requires this to stay within a share of the premium collected, varying by line of business. The regulator's stated concern, per this reporting, is that commissions on certain motor policies are running high enough to warrant a closer, more transparent accounting, of who is being paid, how much, and whether that cost is visible to the person actually paying the premium.

This matters because motor insurance commission structures are not typically shown on your policy schedule. You see a total premium, sometimes split into own-damage and third-party components, but not a breakdown of how much went to underwriting risk versus paying the channel that sold you the policy.

How commissions get built into your motor premium today

A useful way to think about a motor premium is as several layers stacked together:

• The pure risk cost, what the insurer expects to pay out in claims for a vehicle like yours, in your city, with your claims history.
• Insurer overheads, administration, technology, claims processing infrastructure.
• Distribution cost, the commission or facilitation fee paid to whoever sold you the policy.
• Insurer margin.
• Applicable taxes, GST is charged on the full premium.

Distribution cost is the layer under scrutiny here. It tends to be highest when a policy is bundled at the point of vehicle sale, at a car dealership or two-wheeler showroom, because the dealer or its finance partner is often paid a facilitation fee on top of any commission the insurer or broker earns. It tends to be lower when you buy directly from an insurer's own website or app, or through a comparison aggregator, because there are fewer intermediaries between you and the insurer.

What could change for car and two-wheeler owners

Nothing changes on your existing policy or your next renewal notice purely because IRDAI has called for transparency, that's a regulatory conversation, not an order to insurers to cut prices. But directionally, a few outcomes are plausible if this develops into a formal rule:

• Insurers may be required to disclose the commission component of a policy separately, similar to how some loan products now disclose processing fees and other charges separately from the headline interest rate.
• Insurers facing pressure on their overall expense ratio may look to trim commissions on the channels where they run highest, typically dealership tie-ups, which could, over time, narrow the price gap between a dealership-sold policy and a directly-bought one.
• Add-on covers (zero depreciation, engine protection, roadside assistance) sold alongside the base policy, often commission-heavy themselves, could come in for similar scrutiny.

None of this is guaranteed, and there's no timeline in the reporting for any rule change. Treat this as an early signal, not a settled outcome.

A worked example: where a motor premium can go

To make "high commission" concrete, here is an illustrative, not official, breakdown of how a 10,000 rupee comprehensive car insurance premium might be split across cost layers. The exact figures vary by insurer, vehicle, city and channel; this is a simplified illustration to show the mechanics, not a quote from IRDAI or any insurer.

Cost layer	Illustrative share of premium	What it covers
Claims/risk cost	~55-60%	Expected payouts for own-damage and third-party claims
Insurer overheads	~10-12%	Administration, technology, claims processing
Distribution/commission	~15-25%	Payment to agent, broker or dealership for selling the policy
Insurer margin	~5-8%	Insurer's own profit margin
GST	18% of net premium	Statutory tax, added on top

The wide band on distribution cost (15-25%) is the point IRDAI's transparency push is aimed at: a policy bought at a dealership finance desk sits at the higher end of that band far more often than one bought directly online, even when the underlying risk cover is identical.

Who is affected, and who isn't

• Most affected: buyers financing a new car or two-wheeler through a dealership, where insurance is often bundled into the loan paperwork with limited visibility into the premium build-up.
• Also affected: owners who auto-renew through the same agent or channel every year without comparing quotes.
• Less affected: owners who already buy directly from an insurer's website, app, or an aggregator, where distribution costs are structurally lower.
• Not affected in the short term: anyone with an existing policy mid-term, commissions are baked in at the point of sale, and a transparency rule, if it comes, would apply going forward, not retroactively.

What to do now if you're buying or renewing motor insurance

1. Get at least two quotes before you renew, one from your existing insurer and one from a direct or aggregator channel, and compare the total premium, not just the third-party or own-damage split.
2. If you're buying a new vehicle, ask the dealership for the insurer's direct quote and compare it against the bundled quote before signing the finance paperwork; if you're taking a vehicle loan alongside it, run the numbers on an EMI calculator so insurance and loan costs aren't blurred together.
3. Ask explicitly whether add-ons (zero depreciation, roadside assistance, engine protection) are being auto-included, these often carry their own commission and can be dropped or bought separately if you don't need them.
4. Check the no-claim bonus (NCB) transfer if you're switching insurers or vehicles, this is unrelated to commission but is commonly lost through inattention at renewal time.
5. Track industry-level regulatory changes on interest rates and lending costs as well as insurance, since vehicle financing and vehicle insurance are usually bought together; our interest rates page is a useful reference point when comparing the full cost of owning a financed vehicle.

Common mistakes to avoid, and what to watch for next

• Assuming a lower headline premium always means a worse policy, sometimes it just means a leaner distribution cost, not weaker cover.
• Auto-renewing without a fresh quote, which is exactly the pattern that keeps high-commission channels profitable.
• Treating bundled add-ons as compulsory when most are optional and separately priced.
• Ignoring the fine print on what "own damage" actually excludes, in the rush to compare premium numbers alone.

Watch for any formal IRDAI circular or amendment to the expenses-of-management framework in the coming months, that would be the concrete signal that this transparency push has turned into an actual rule change affecting how your premium is quoted. Keep an eye on our news section for updates as they're reported.

Frequently asked questions

Does this mean my motor insurance premium will go down?

Not necessarily, and not immediately. IRDAI's call for transparency is about disclosure of commissions, not a mandated premium cut. Any downward pressure on price would come indirectly, over time, if insurers respond by trimming distribution costs on high-commission channels.

Why do dealership-sold policies tend to cost more?

Dealerships and their finance desks are typically paid a facilitation fee on top of the insurer's or broker's own commission, which can push the distribution cost layer of the premium higher than a directly-bought policy for the same cover.

Should I switch insurers because of this news?

Not on the basis of this reporting alone, no specific insurer or premium has been named. It's a reasonable prompt to get a fresh quote at your next renewal and compare it with what you're currently paying, which is good practice regardless of this development.

Is commission the same thing as the third-party premium component?

No. Third-party premium is a separate, tariff-based component set by the regulator for the mandatory third-party liability cover; commission is the distribution cost layered on top of both the third-party and own-damage components of your total premium.

Where can I check if my insurer is complying with IRDAI norms?

IRDAI's website carries its regulations, circulars and notifications, including its expenses-of-management framework that governs commission limits; you can also check an insurer's registration status through IRDAI's official channels if you have concerns about who you're buying from.