How government policies are shaping the motor insurance industry

Buying or renewing motor insurance today looks very different from a few years ago. From digital policy issuance to EV-specific add-ons, the industry is undergoing rapid change, and at the centre of it is the government's impact on insurance. Through regulatory updates, road safety reforms, and EV incentives, government actions are reshaping what's covered, how much customers pay, and who can sell a policy.

IRDAI guidelines: Redefining motor insurance distribution

The Insurance Regulatory and Development Authority of India (IRDAI) has steadily upgraded guidelines for Motor Insurance Service Providers (MISPs), making the sale of motor insurance more transparent and customer-friendly.

Key requirements include:

• Only legally compliant automobile dealers can register as MISPs.
• MISPs may distribute products from multiple insurers but only IRDAI-approved motor policies and add-ons.
• Premium pricing must follow IRDAI norms, with policies issued digitally.
• Fees are capped: up to 22.5% of Own Damage premiums for two-wheelers and 19.5% for other vehicles.
• A robust grievance redressal system through the Integrated Grievance Management System (IGMS) is mandatory.
• Daily data must be uploaded to the IIB Portal, and CEOs must certify compliance.

These measures reduce malpractice, ensure fair pricing, and give policyholders clearer access to coverage.

Road safety policies and their insurance impact

The Government of India has introduced major reforms to make roads safer. Fewer accidents mean lower claim volumes, influencing the design and pricing of motor insurance products.

Key initiatives include:

1. Road Safety Information Database - A national system improves crash data accuracy, helping insurers assess risk more effectively.
2. Safer Road Infrastructure - Adoption of Intelligent Transport Systems (ITS) reduces accident-prone zones.
3. Safer Vehicles - Regulations mandating advanced safety features lower accident risks and premiums.
4. Driver Competency - Improved licensing and training programmes reduce crash frequency and claims.
5. Protection for Vulnerable Users - Road designs prioritising pedestrians and cyclists lead to fewer third-party claims.
6. Road Safety Education - Awareness campaigns and school curricula encourage long-term behavioural change.

EV incentives and green insurance

Government incentives are accelerating EV adoption, creating new opportunities for insurers to design customised green covers. Key measures include:

• 5% GST on EVs and charging stations
• Road tax waivers across several states
• Permit exemptions and green number plates
• Customs duty relief on lithium-ion cell production machinery
• Expansion of charging infrastructure with over 12,000 public stations
• Sales penetration targets of up to 80% in select vehicle categories

With stronger EV uptake, insurers are offering specialised products tailored to electric mobility.

Final thoughts: A more customer-centric future

The government's impact on insurance is driving the motor sector toward fairness, safety, and sustainability. IRDAI's regulations are making distribution more transparent, road safety reforms are reducing risks, and EV incentives are enabling greener mobility solutions. Together, these policies ensure that motor insurance in India is evolving into a safer, smarter, and more customer-centric product.