Motor Insurance Not Mandatory from Dealers: Experts Warn Against Mis-selling Practices

Purchasing motor insurance is a legal requirement for vehicle owners in India, but buying it directly from a dealer at the time of purchasing a car or bike is not compulsory. Industry experts are raising concerns that many consumers remain unaware of this distinction, often leading to mis-selling and inadequate coverage.

According to the report, insurance is frequently bundled into the “on-road price” quoted by dealers, creating the impression that it is a mandatory part of the purchase. However, buyers are free to choose their own insurer and policy, allowing them to compare options and select coverage that best suits their needs.

Experts note that dealerships often promote in-house insurance policies, sometimes suggesting that opting for an external insurer could complicate claims or servicing. Such claims, however, are misleading, as customers retain the right to choose any insurance provider without affecting their vehicle’s servicing or claim process.

A key issue lies in the commission-driven structure of insurance sales at dealerships. In many cases, customers are offered policies that may appear cost-effective but lack essential add-ons such as engine protection, zero depreciation, or consumables cover. This can leave policyholders exposed to unexpected expenses during claims. The consequences of such gaps usually emerge at the time of filing claims, when customers realise that their policies do not provide the level of protection they had assumed. This mismatch between expectations and actual coverage has become a growing concern in the motor insurance space.

Another important aspect often overlooked is the No Claim Bonus (NCB), which is linked to the policyholder rather than the vehicle. Buyers who have maintained a claim-free record can transfer this benefit to a new policy and avail significant discounts on premiums. However, this advantage is not always communicated effectively during dealer-led transactions. Experts advise consumers to avoid rushing the insurance decision while purchasing a vehicle. Instead, they should evaluate multiple policies, review coverage details, and ensure all applicable benefits are included.