The
insurance regulator IRDA has floated a discussion paper to study in detail the issues
related to Dealers & Manufacturers of Automobiles and other services also selling insurance policies. They are referred to as
Tying and Bundling of insurance plans with their existing services and products.
Currently a large number of automobile dealers and their group entities serve as brokers or corporate agents of insurance companies and often club sale of
insurance policies with the sale of the vehicle.
The regulator IRDA feels that insurance is a complicated product and the intermediary plays a very important role in distributing the product in terms of quality of advice and after-sales service also. For good or for bad, the power of the agent/broker in influencing the sale of the product is very large and proper disclosures should be made in the process to avoid conflict of interest. For example, brokers and agents should disclose the amount of commission received by them from the insurance company, if requested by the customer. It is felt that customers suffer due to asymmetric information availability and rely largely on the distributor which can lead to mis-selling as a result of conflict of interest. Often customers are forced to buy bundled products – car and the
car insurance policy for example. Channels like Bancassurance and new concepts like Mallassurance are very strong propositions for establishing a strong distribution network for any insurance company.
IRDA has floated this discussion paper so that all interested parties can share their views and opinions on the same by 15th March 2012. This is indeed a step in the right direction and there and both positives and negatives in such models and greater clarity will always work in the consumer’s favour.
