The committee constituted by the Insurance Regulatory and Development Authority of India (IRDAI) has recommended direct payment of insurance premium to the insurance company while purchasing a vehicle, thereby suggesting separate payments for both buying the vehicle and the premium.
The Committee for Review of MISP (Motor Insurance Service Provider) Guidelines examined the current practice of collecting the premium payment from the customer while soliciting the motor insurance policy.
"The customer should make payment to the insurance company directly which is facilitated by the MISP. MISP shall not collect the insurance premium amount in its own account and then transfer the same to the insurance company," its report said.
As per the panel, there is lack of transparency in the cost of insurance premium when the customer buys the vehicle for the first time through the dealer as the customer pays one single cheque or payment for the cost of the vehicle and the insurance premium.
The MISP then pays through the insurance intermediary or directly to the insurance company through his own account. The customer does not know the insurance premium being paid as it is subsumed in the cost of the vehicle.
"This lack of transparency is not in the interest of the policyholder's interest as the true cost of insurance is not known to the customer. The customer may not be aware of the coverage options and discounts available in the process," it said.
The committee also noted that the customer cannot negotiate with the MISP to get the best coverage at the optimal price.
"There are also instances, where the policies are cancelled immediately after issuance refunding the premium. In cases, where MISP is making the payment through its account, the sources of funding is not known to the insurer and may also lead to possible anti money laundering activities," it added.
