Motor insurance service provider (MISP)

What is a motor insurance service provider?

A motor insurance service provider (MISP) is an authorised automobile dealer, or sub-dealer of a manufacturer, that has been appointed by an insurer or an insurance intermediary to distribute motor insurance for the vehicles it sells, and to service those policies afterwards. A vehicle cannot be used on a public road without at least third party cover, and buyers commonly take that policy at the showroom, which makes dealers a major point of sale for new-vehicle motor insurance.

IRDAI brought dealers into a formal framework through its Guidelines on Motor Insurance Service Providers, notified on 31 August 2017. Before that, dealer involvement in motor insurance was largely outside direct regulation, and payments to dealers were a recurring concern.

How the MISP framework works

• Appointment. An insurer or an intermediary (usually a broker linked to the vehicle maker) appoints the dealer through a written agreement. An MISP can be sponsored by one or more insurers, or by one intermediary, but not both.
• Designated person. Each MISP nominates a designated person. The designated person and other staff who sell insurance must have passed Class 12, and must be trained and certified by the sponsoring insurer or intermediary through a POSP-style examination. One certified person can serve several insurers.
• Scope. The MISP may sell and service only motor policies on vehicles it sells: issuing the policy, handling endorsements, renewals and cancellations, and guiding customers on claims. It cannot solicit motor business from people who did not buy their vehicle there.
• Customer choice. The MISP must offer policies of different insurers where it has more than one sponsor, disclose the premium clearly, and issue a policy only with the buyer's explicit consent. It must not force the buyer to take cover from a particular insurer.
• Payment. The guidelines limit what MISPs may receive from insurers to the permitted distribution fee and bar any other direct or indirect payment. MISP data is reported to the Insurance Information Bureau.

What has been proposed in 2026

Motor dealer distribution is one of the most heavily affected areas in IRDAI's consultation paper "Recalibrating Economics of Insurance Distribution" (23 September 2026). As summarised by Khaitan and Co, the paper:

• reports new-vehicle own damage commission of 27% to 38% through OEM-linked brokers and MISPs;
• proposes that dealers organised as companies, LLPs, cooperatives or registered partnerships register as Insurance Distribution Entities in their own right, able to sell for several insurers, while proprietorship dealers become POSPs or insurer associates;
• proposes caps for open architecture entities of nil on new-vehicle third party cover and 5% on new-vehicle own damage;
• would require dealers to show customers the option of buying motor cover on a market infrastructure platform such as Bima Sugam, through a QR code;
• would bar dealers from refusing cashless repair because the policy was bought elsewhere, and from incentive plans with manufacturers that reward insurance sales.

These are proposals, with comments due by 25 October 2026.

What MISPs mean for distribution

• The showroom is a captive moment. A buyer taking delivery rarely shops for insurance separately, which gives the dealer pricing power and has drawn regulatory attention to forced or default selling. Expect more emphasis on documented customer choice.
• Renewal is where the dealer usually loses the customer. After the first year, an owner can renew anywhere, online or through an agent. Insurers that want to keep the customer track renewal retention for MISP-sourced policies separately from new-vehicle volumes.
• Claims and repair link the two sides. Dealers with workshops earn from repairs as well as insurance. The proposed ban on refusing cashless repair for policies bought elsewhere is aimed at the habit of steering customers to the dealer's own policy.
• Add-ons need careful explanation. Zero depreciation, engine protection and return to invoice covers are commonly sold at the showroom. Explaining exclusions and claim limits at the point of sale reduces disputes later.
• Plan for lower payouts. If the proposed caps are adopted, dealer income from insurance would fall sharply. Insurers and OEM brokers should plan service models that work at lower commission, including digital issuance and shared claims desks.