Q1. Can I buy motor insurance through Bima Sugam?

Not yet; the Bima Sugam portal is expected to offer motor insurance products as part of the proposed reforms. But as of October 2026, it is not fully operational for purchases, and there is no fixed Bima Sugam launch date announced yet. It will become available once the platform goes live in phases.

Q2. Will Bima Sugam be mandatory for new-car buyers?

No, the proposal only requires dealers to display the digital option Bima Sugam (including a QR code) and make buyers aware of it. Buyers remain free to purchase from the dealer, an insurer, a broker, or the digital platform.

Q3. Can a car dealer force customers to buy insurance from a particular insurer?

IRDAI’s proposals would require dealers to make buyers aware of Bima Sugam, the digital alternative to buying through the showroom. Agreements that restrict customer choice or link insurance sales to OEM incentives in a way that harms policyholders are proposed to be restricted.

Q4. Will cashless repairs be available at every dealership?

If the proposals get finalized, dealers could not deny cashless repair service merely because the policy was bought elsewhere. However, cashless facility still depends on the specific insurer’s network agreement with that workshop.

Q5. Will the proposed changes reduce car insurance premiums?

The proposed changes aim to lower distribution costs (especially on third-party and new-vehicle own-damage covers). Lower commissions and greater competition may lead to better pricing over time, but premium reductions are not guaranteed and will depend on final rules and how insurers respond.

Q6. When could the proposed motor insurance changes take effect?

IRDAI will review feedback and then issue final regulations. No exact date has been announced; implementation is expected in phases after the final rules are notified.

Q7. Will car dealers still be allowed to sell insurance after the new rules?

Yes, dealers can continue selling motor insurance. However, larger dealers will need to register as Insurance Distribution Entities (IDEs), while smaller dealers (proprietorships) will work as Point of Sale Persons (PoSPs) under an IDE or as associates of a single insurer.

Q8. Do the proposed changes apply only to new cars or also to renewals?

The strongest reforms (very low commissions and mandatory display of digital option) are focused on new vehicles. However, the paper also proposes that motor insurance for both new and existing vehicles should be available on platforms like Bima Sugam.

Q9. What happens if a dealer does not show the digital option or forces a particular policy?

Under the proposals, this would be treated as a violation of regulatory obligations. Dealers may face regulatory action, and customers will be able to report such practices through the Public Insurance Registry (PIR) and grievance systems.

Q10.Will third-party insurance become cheaper for new cars?

The proposals recommend Nil commission for distribution entities and only 2.5% for agents/associates on third-party cover for new vehicles. This is expected to reduce distribution costs significantly, which may help lower premiums, though the final impact will depend on how insurers price the product.

Bima Sugam and IRDAI's proposed motor insurance rules for new-car buyers in India

By Komal Bhatt Last Updated: Oct 28, 2026

11 min read
245 views

Buying a New Car in 2026? How Bima Sugam and IRDAI's Proposed Rules Could Change Motor Insurance

A Quick Summary
IRDAI’s September 2026 Public Consultation Paper on Distribution Reforms proposes major changes to motor insurance. The goal is to reduce high commissions, give new-car buyers a real digital choice through platforms like Bima Sugam, stop dealers from controlling the insurance decision, and lower distribution costs. However, these changes are still proposals and are subject to being finalized by IRDAI.

Buying a new car involves more than choosing the model, negotiating the price, and arranging a car loan. You also need to select the right motor insurance policy before taking your car on the road. In India, many buyers arrange their insurance through the car dealership.

But do you know it might change now? Because the Insurance Regulatory and Development Authority of India (IRDAI) has recently proposed some changes in motor insurance through its Public Consultation Paper on Re-calibrating the Economics of Insurance distribution (released September 2026) that could give motor vehicle buyers more freedom to choose and buy their motor insurance.

But what are the proposed changes? This blog explains what IRDAI has proposed, what it could mean for your next car purchase, and what to expect if the proposals get finalized.

What Are IRDAI's Proposed Motor Insurance Changes?

Section 12 of the Consultation Paper is titled Streamlining Motor Insurance and covers six areas of proposed changes in motor insurance by IRDAI.

Digital option for Vehicle buyers

IRDAI has proposed that motor insurance for both new and old vehicles should be available on Market Infrastructure Institution (MII) platforms such as Bima Sugam, which is one of the core initiatives of the Bima Trinity by IRDAI. The idea is to give you a direct digital route, so you do not depend only on the policy your dealer offers.

Not-for-profit: The platform is set up by IRDAI and is expected to run as a not-for-profit company.
Fee limit: The platform should not charge more than 5% of the premium to recover its cost.

Regulated Role of Dealers

Dealers selling insurance would also be bound by defined duties. These are meant to help a new-car buyer make a well-informed decision. Here are the regulatory responsibilities they must fulfil:

Display the digital option: Dealers would have to show the option to buy on the digital platform, including a QR code.
Awareness: Dealers have to make buyers of new vehicles aware of this option.
Mobile number check: Share the customer's mobile number with the Public Insurance Registry (PIR). It should be the same number given to the transport authorities for registration. PIR validates it with VAHAN and sends the customer a message after the sale to confirm the duties were met.

Registration rules for dealers selling insurance

Today, dealers who sell insurance work as Motor Insurance Service Providers (MISPs). IRDAI proposes to bring them under a clearer structure:

Companies, LLPs, cooperative societies and registered partnerships: The mentioned entities must register as an Insurance Distribution Entity (IDE) if they want to sell insurance. An IDE can sell products of multiple insurers.
Proprietorships and unregistered partnerships: These entities must tie up as a Point of Sales Person (PoSP) of an IDE, or become an associate of a single insurer. A PoSP can sell products of all insurers the IDE has tied up with. An associate can sell only that insurer's products.

No denial of cashless repairs

IRDAI lists this under the expected market conduct of dealer IDEs and PoSPs. A dealer should not deny cashless car insurance repair service to a customer just because the insurance policy was not bought from the dealer.

Regulating Dealer and OEM arrangements

Dealers should not have agreements with the car maker (OEM) or the IDE that go against the interest of policyholders. The paper names two examples: service level agreements, and OEM incentive plans that reward dealers for selling insurance policies.

Lower commissions on new-vehicle insurance

IRDAI says mandatory third-party insurance and easy-to-sell motor insurance for new vehicles should have much lower commissions. The proposed maximums, as a percentage of premium, are given as follows:

Third-party (New vehicle): Nil for distribution entities and 2.5% for insurance agents and associates.
Own damage, personal accident and legal liability (New vehicle): 5% for distribution entities and 10% for agents and associates.

Note: It is important to note that the proposals mentioned above are not yet confirmed final rules. They are subject to public review by 25th October, 2026, and IRDAI's review before any final decisions are made.

Source: Public Consultation Paper on Recalibrating the Economics of Insurance Distribution (Part-1)

Why IRDAI Is Proposing These Changes?

Over the past few years, Motor insurance has become a clear example of commission-driven rather than customer-driven sales. According to IRDAI’s consultation paper:

Between FY23 and FY25, motor premium grew by about 34%, while motor commissions grew by around 259%.
Average commission rates in motor insurance stand at 24% (range 13–50%).
OEM-linked brokers and Motor Insurance Service Providers (MISPs/dealers) control roughly 30% of the market and earned average commissions of 24% (peaking at 31%). In FY25 alone, they generated approx. ₹29,000 crore in premium and received almost ₹7,050 crore in commissions.
For new vehicles, third-party insurance is essentially a nil-effort product (registration cannot happen without it), yet average commissions charged by OEM brokers and MISPs were 27% and 38%, respectively.

These figures indicate that overall distributor remuneration in several channels has been growing 4-5 times faster than the underlying premium. Therefore, the proposed IRDAI new motor insurance rules aim to correct this imbalance.

How Could the Changes Affect New-Car Buyers?

When you buy a car, the dealership may offer insurance as part of the purchase process. This can be convenient because you can arrange the vehicle, financing, and insurance in one place. However, the convenience does not automatically mean that the insurance policy is the best fit for your needs.

The IRDAI proposed motor insurance changes could make it easier for you to explore different insurance options. Here's how this could help:

More freedom to choose: You could explore insurance options beyond the ones offered by your car dealer and select a policy that suits your needs.
Better comparison: You could compare premiums, coverage, add-ons, and deductibles across available policies before making a decision.
More flexibility in repairs: Buying insurance from a different provider may not prevent you from accessing cashless repairs at a dealership, subject to the final rules and applicable conditions.
Potential cost savings: Greater competition and lower distribution costs could create scope for better pricing, although lower premiums are not guaranteed.

What Is Bima Sugam and How Could It Help You Buy Motor Insurance?

Bima Sugam is a proposed digital marketplace designed to make insurance easier to discover and purchase. The platform is intended to provide a more direct way for customers to explore insurance products rather than depending entirely on traditional distribution channels.

Under the proposed framework, customers could use a digital platform to explore available motor insurance products and make a more informed choice. The process could broadly involve the following steps:

Access the digital insurance platform through its website or a QR code displayed by the dealership.
Enter the required vehicle and customer details.
Go through the Bima Sugam motor insurance policies that appear on the platform.
Compare the available policies based on premium, coverage, and other relevant features.
Select a suitable policy and complete the purchase through the available payment process.

Note: As of October 2026, the Bima Sugam is not fully operational for buying policies. According to reports, it is expected to become operational in phases, with motor insurance being the first insurance category for a phased rollout due to its higher standardisation, simpler underwriting, well-defined policy structures, high volume, and easier technical integration.

Buying Motor Insurance Through Bima Sugam vs Dealer, Insurer or Broker

New-car buyers can consider different routes for purchasing motor insurance. Each has its own advantages, depending on the customer's priorities and the services available. The following comparison explains how the options differ. This comparison describes the general buying models. Actual services vary between providers.

Factor	Bima Sugam or another eligible MII	Car dealership	Insurer	Insurance broker
Main purpose	Proposed digital marketplace for insurance purchases	Convenient insurance arrangement during vehicle purchase	Direct purchase from an insurer	Assistance in comparing and purchasing available insurance products
Choice of insurers	Depends on participating insurers and products	Depends on the dealer's arrangements	Generally limited to that insurer's products	Depends on the broker's insurer relationships
Online purchase	Intended as a core feature	May be available through the dealer's digital process	Generally available	Often available
Convenience	Could simplify online discovery and purchase	Can coordinate insurance with vehicle delivery	Direct interaction with the insurer	Can assist with selection
Claim support	Depends on the services ultimately provided	May assist with coordination, subject to its role	Direct access to the insurer's claim process	Depends on the broker's services and arrangements

What Motor Insurance Should You Buy for a New Car in India?

Before you compare the different insurance providers, understand the main types of motor insurance available in India. The right choice depends on the protection you need, your budget, and the risks you want to cover.

Mandatory third-party motor insurance

Under the Motor Vehicles Act, 1988, third-party cover is compulsory for every vehicle on Indian roads. It pays for your legal liability if your car injures or kills someone, or damages their property. It does not pay for damage to your own car. For a new vehicle, registration happens only after proof of insurance.

Comprehensive car insurance

A comprehensive policy combines third-party cover with own-damage cover. It protects your car against accidents, fire, theft, natural calamities, and similar events, subject to the policy terms.

Standalone own-damage insurance

This covers only damage to your own car and can be bought separately from third-party cover. It is practical to buy standalone own-damage insurance cover when you already have a third-party cover.

How to Choose the Right Motor Insurance Policy for a New Car?

Once you understand the available policy types, use the following checklist to compare your options and select the most suitable motor insurance policy for your vehicle:

Compare the insured declared value (IDV): IDV represents the insured value used for specified total-loss and theft claims, subject to the policy. A policy with a lower premium may also have a different IDV.
Check cashless garage availability: Always check for authorised workshops and other suitable garages within the insurer's cashless network. Reach out to the workshop of your preferred dealership and ask what cashless facilities it offers at the moment.
Review exclusions, deductibles, and claim conditions: Read the policy wording to understand what is covered and what is excluded. Check compulsory and voluntary deductibles, depreciation conditions, claim reporting requirements, and any specific circumstances.
Compare add-ons and claim support: Compare the add-ons, their prices, limits, and exclusions, and also consider the insurer's claim procedures, customer support, and grievance-handling arrangements.
Check the policy details before making payment: Confirm the vehicle details, policy period, IDV, premium, and selected add-ons. Review the final quotation and make sure you understand any deductibles or limitations.

Conclusion

Buying a new car in India has traditionally meant accepting the insurance policy offered by the dealership. Now, IRDAI’s proposed motor insurance rules for new cars aim to change that. By introducing digital options through platforms like Bima Sugam, limiting commissions on simple new-vehicle products, requiring dealers to inform buyers of alternatives, and protecting cashless repair rights, the regulator wants to regulate the motor insurance segment.

These changes, if finalised, should improve transparency, increase competition, and potentially lower costs over time. However, they are still at the consultation stage. New-car buyers should stay informed, compare options carefully, and keep track of upcoming updates regarding these proposed reforms.

Disclaimer: The information provided in the blog is for informational and educational purposes only. While every effort has been made to provide accurate and updated information, the details may vary as per different sources. You are advised to consult qualified professionals before making any decision.