In India, having at least a third-party insurance policy for a vehicle is mandatory as per the law. Now, when customers go to automobile dealers to purchase a vehicle, the dealer may persuade them to purchase an insurance policy along with the vehicle. As a result, many customers prefer purchasing insurance from the automobile dealer they buy their vehicle from. After all, they just need to make a single, one-time payment for both the insurance policy and the vehicle. Automobile dealers have established themselves as a strong insurance distribution channel today.
To identify and regulate the role of automobile dealers in distributing and servicing motor insurance products, the IRDAI issued the ‘Guidelines on Motor Insurance Service Providers’ (MISP Guidelines) on 31st August 2017. In this article, let’s learn in detail about these guidelines, why the IRDAI introduced MISP, and more.
What is MISP?
MISP (Motor Insurance Service Provider) is an entity that was introduced by IRDAI, to identify and regulate the role of automobile dealers in servicing and distributing motor insurance products.
Why Was MISP Introduced By The IRDAI?
Automobile dealers are the initial point of contact for customers when purchasing a new vehicle. Hence, they have a better affinity with the customer, and as a result, they end up selling insurance along with the vehicle - as stated above. Earlier, automobile dealers used several different strategies to handle their customers' motor insurance needs. They obtained an agency license with an insurance company, formed service collaborations with the broker, or established their own insurance brokerage company.
In November 2017, the IRDAI constituted a seven-member committee to bring clarity and transparency to the procedures and payouts made by insurance companies to automobile dealers in order to get motor insurance business. This was the birth of MISP as a distribution entity in the Indian insurance sector.
Who Is Eligible To Become A MISP?
Here are dealers and manufacturers who are eligible to become a MISP according to IRDAI norms -
Sub-dealer of an automobile manufacturer who sells new or used automotive vehicles.
These dealers and manufacturers shall be sponsored by insurance companies or an insurance intermediary.
Key Guidelines For MISP
The IRDAI issued the Motor Insurance Service Providers (MISP) guidelines on 31st August 2017, with compliance taking effect on 1st November 2017. A few important guidelines include -
The MISP must maintain records for at least 7 years, from the date of issuance of the insurance policy or from the date of termination of the MISP's appointment, whichever is later.
If an insurance intermediary appoints the MISP, it can only work for a limited number of insurers as allowed under the respective regulations governing the intermediary.
A MISP can work for one or more insurers either directly or through the insurance intermediaries.
While requesting and servicing insurance policies, the MISP must follow the code of conduct prescribed under the MISP guidelines.
How To Become A MISP?
Here are the steps involved in becoming a MISP -
Contact The Insurer/ Broker
The first thing you’ll need to do is contact an insurance broker or insurance company and submit proof of your identity as a car dealer/sub-dealer. If you are a new car dealer and are interested in becoming a MISP, you can also contact SMC Insurance.
For instance, Naira’s electric bike stops working because of a mechanical fault. So, in case she raises a claim for this, the insurer won’t pay her anything as damage due to mechanical failure is excluded under the policy.
Evaluation Of Proposal
Next, the insurance broker, such as SMC, or the insurance company, will review your proposal in accordance with the IRDAI's guidelines and requirements.
After the proposal evaluation is done, the insurance broker or insurance company will either approve or reject the application.
Advantages Of MISP To Customers
Here are a few ways in which MISP can benefit customers -
Customers are more benefited from this because they get a broader selection of insurers from which they can buy insurance from.
Due to the increased margin, insurers are in a better position to offer customers better discounts on their own damage premiums.
Low Chances Of Claim Rejection
As MISP will fall under the purview of IRDAI, dealers won’t be able to reject the claims of customers based on the fact that the policy was obtained from another intermediary.
So, overall -
The MISP creation will benefit customers.
Insurers will have to pay lower commissions to dealers than in the past.
Dealers will be the most affected by this decision. Because -
That is all from our side today. We hope you have now understood the MISP guidelines given by IRDAI, how MISP can benefit customers and the process of becoming a MISP.