Can I pay insurance premiums to a distributor instead of an insurer?

An insurance distributor has suggested that I pay the premium to them instead of the insurance company. They are offering attractive premiums. What measures can I take to ensure I am not cheated?

– Name changed on request

Under the law, insurance premiums can only be paid to insurers. It’s illegal for any company other than a licensed insurer to collect them, so you should refrain from signing such contracts. Any kind of assurance or undertaking from the distributor will not be binding on the insurer. Ultimately, it is the insurer that pays your claim, so you should always have contract with it. If your payment is not made to the insurer, it won’t recognise you as a policyholder. You’ll also find it hard to resolve any issue with the service or claims.

I recently exchanged my old car for a new one. I have never made any claims. The old car is now in the custody of the dealer. Can I get a refund for the premium for the remaining policy term? If so, what’s the process for this?

– Name changed on request

You can get a refund of the premium for the unexpired period of your policy. If you sell the car to a dealer, they may insist that you continue with the third-party premium. This is because third-party insurance is compulsory. In such a scenario, you can ask your insurer to bifurcate the policy into ‘own damage’ and ‘third-party liability’. The OD component can be cancelled, and you can get refund for the unused period.

Since you have not made any claim, you are likely to carry a high ‘no-claim bonus’. You can ask your current insurer to issue you a no-claim bonus certificate and carry forward the bonus to your new car insurance premium. This will help you get a substantial discount on the premium for your new car.

Abhishek Bondia is co-founder & principal officer at SecureNow Insurance Broker.