Pushed by the new regulations by the insurance regulator IRDAI, the domestic general insurers have decided to reduce their premiums in the `own damage’ segment by 5-20 per cent for the existing and new customers of private and commercial vehicles.

This is for the first time that almost all the general insurers, including New India Assurance, United India Assurance, Bajaj Allianz General Insurance, ICICI Lombard General Insurance, Tat AIG General Insurance, HDFC Ergo General Insurance, SBI General  Insurance have revised their own damage premiums downward despite incurring higher claims. 


There are two types of motor covers-own damage(OD) and third party (TP) motor policy.The OD is an optional policy while TP is a mandatory one whose pricing is still regulated by the insurance regulator IRDAI.The own damage segment is a profitable business for the general insurers while third party portfolio overall is a loss making one for them.  


General insurers say premiums reduction is largely due to the IRDAI’s MISP(Motor Insurance Service Provider)  circular which reduced the commission to auto dealers. Insurance regulator, had 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 insurance companies used to pay this distribution fees in the range of 30-40  per cent, across the segment.

MN Sarma, CMD, United India Insurance

Confirming the development, MN Sarma, CMD, United India Insurance said, “Earlier, since the sector was detarrifed, we used to give a discount of upto 40-45 per cent to our customers. After MISP guidelines were unveiled, we have increased the discount level up to 60 per cent for an average customer. This has been possible as there is a cap on commission to be given to the car dealers and we want to pass on the saved amount on commission to the car owners. Now, the total discount on the segment has gone up to 95 per cent. Still, we are happy as we are able to do the business with even 5 per cent margin left with us.’’ 


G Srinivasan, CMD, New India Assurance

G Srinivasan, CMD, New India Assurance, the country’s largest general insurer, said post MISP, the motor insurance market will witness a differential pricing scenario where a customers with good claims records will get reduction in the pricing while the premium will go up for a bad customer. 


“There wouldn’t be any uniform revision in pricing for all the customers in the OD segment in MISP regime. We will review all the accounts and the premiums for the accounts, where our experience is bad  will be hiked.’’ he said.


K Sanath Kumar, CMD, National Insurance Company

K Sanath Kumar, CMD, National Insurance Company said, “We are not sure about the impact of the new MISP guidelines as the claims in the OD segments are rising,’’  


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. 


“Since auto dealers have been brought under the bracket of MISPs, there has been an approximate 15% reduction in premium for motor insurance at SBI General Insurance. There are a number of things that may affect this, including the model of the car, driving capabilities of the customer, etc”, added Mathur. 


 IRDAI has simplified the process by allowing the insurer to appoint an auto dealer rather than having a stringent training procedure for other intermediaries. Further, with the implementation of MISP, motor dealers will exhibit greater transparency in the entire approach to distribute motor insurance through this channel, he added.


Tapan Singhel, MD & CEO, Bajaj Allianz General Insurance said, “This New Year, we are taking one more step in this direction by relooking at our prices and lowering premium rates in private car segment, which will create value for money for our customers.