Dealer Drive: Motor Channel Profitability

At 22%: commission ₹6.91 crore + logistics ₹0.57 crore + expenses ₹3.77 crore + claims ₹25.50 crore = ₹36.75 crore, or 117% of OD premium.

At 26%: commission ₹8.16 crore, everything else unchanged = ₹38.00 crore, or 121%.

The 26-point demand therefore does not move the channel towards profit - it adds ₹1.25 crore of cost to a book already losing about ₹5.3 crore. What loss ratio could support it? With 26% commission, 1.8% logistics and 12% expenses, break-even requires a 60.2% loss ratio. The dealer pool is at 81%, and the demanding dealer at 97%.

So the answer is: not as a flat rate. A flat 26% spreads a subsidy to 44 dealers averaging 74% in order to fund two dealers whose claims are the problem. The counter-offer should be structural:

• 22% base retained, plus a 4-point performance pool released per dealer on a rolling 12-month OD loss ratio of 75% or better and renewal retention of 70% or better. The good 44 dealers earn the extra; the demanding pair do not, until they fix claims.
• For the 97% dealer, a remediation package instead of a rate rise: pre-inspection and photo evidence discipline, a preferred repairer network, voluntary deductibles on high-value total-loss exposure, and a review of which SUV models are being written.
• Check the total payout against the board-approved commission policy and the expense-of-management position before signing anything; the constraining limit is the overall expense line, not a product-wise cap.

The regional head's 'commodity' argument is exactly why rate is the wrong lever: where the file goes should be decided by claims performance, not by who pays most.

Exposure. Motor business solicited through a dealer requires the dealer to be registered as a Motor Insurance Service Provider, and remuneration for such solicitation is payable only in that framework. Payments to eleven unregistered dealers are therefore unauthorised remuneration, and the renewal solicitation itself sits outside the permitted arrangement. Consequences run in both directions: regulatory action and remuneration clawback on the insurer, and exposure for the dealer; plus the insurer's own control failure - the commission engine paid out without checking registration status.

Sequence - stop, scope, regularise, then resume:

1. Stop the money and the solicitation. Freeze commission runs to those eleven codes today and stop new renewal solicitation from them. Do not convert the arrangement into a generic 'referral fee' to keep them selling - referral of a customer is not the same as soliciting and advising on a policy.
2. Scope. Pull 24 months of policies sourced through those dealers: volumes, premium, claims, complaints and who actually signed the proposal forms.
3. Assess conduct. Check whether customers were told who was selling to them and whether any documents were signed by unauthorised persons. Handle any complaint through the grievance process.
4. Regularise. Have the dealers apply, complete the required training and registration, and only then reactivate them with a system validation that blocks payment to any dealer code without a valid registration.
5. Escalate. Report the incident to the principal officer, record it for the board/audit committee, and add the registration check to the pre-payment controls so the failure cannot recur silently.

Paying first and registering later is the pattern that turns a paperwork lapse into a conduct finding.

The scorecard should make the dealer's income depend on the two things that actually destroy value - claims and churn - and on nothing that looks like an inducement.

Metrics and weights:

• Loss ratio, rolling 12 months (40%). OD claims to OD premium at dealer level. Thresholds: 75% or better earns the full pool; 75–85% earns half; above 85% earns none and triggers a remediation plan.
• Renewal retention (25%). Dealer-sourced policies renewed at the next anniversary. This stops dealers writing the first year and abandoning the customer.
• Documentation and conduct quality (20%). Proposal completeness, proposal-form signatures by authorised persons, complaint rate and mis-selling findings. A conduct finding overrides any earned pool.
• Volume (15%). Premium and policies, capped so volume cannot buy its way past a bad loss ratio.

Payment mechanics: 22% base commission plus a performance pool of up to 4 points, trued up quarterly and paid annually in arrears. Withhold the pool where the dealer is unregistered, and claw back commission on free-look or early-lapse cases.

Rules to observe: a single registered MISP arrangement, one remuneration stream from the insurer only - nothing charged to the customer and nothing paid twice - and the whole structure filed within the board-approved commission policy. The 'logistics support' charge at 1.8% should be eliminated and, if it represents genuine service cost, folded transparently into the single commission figure rather than sitting alongside it as an unexplained payment.