IRDAI Draft: Cashless Repair, Any Insurer

A consultation paper from the insurance regulator has been doing the rounds in the motor trade this month. Among its proposals is one that many car owners will recognise from their own experience: that a dealer should not turn down a cashless repair simply because the customer bought the policy somewhere other than the showroom. The comment window closed on 25 October 2026, and the final shape of the rules is still to come. For anyone buying or selling a used car this festive season, the more useful lesson sits underneath the headline. You already have the right to insure wherever you like. What you do not have is automatic own-damage cover on a car you have just bought, unless the policy is moved into your name in time.

What the IRDAI Draft Proposes

The paper is titled "Recalibrating Economics of Insurance Distribution". IRDAI released it in September 2026 in two parts, and asked for comments by 25 October 2026, as reported by MediaNama, Legal500, Lexology and Asia Insurance Post. Its scope is how insurance is sold and who gets paid for selling it. Motor insurance, and in particular insurance sold at the point where a new vehicle is bought, takes up a large part of it.

Cashless repair, whoever sold the policy

The proposal getting the most attention is this: a dealer would not be permitted to deny cashless repair merely because the customer bought insurance elsewhere. Cashless repair is the arrangement where the insurer settles the garage bill directly, and the owner pays only the deductible and anything the policy does not cover, instead of paying the full bill and claiming it back. Under the draft, buying your policy from an insurer, an online platform or a broker, rather than from the showroom, should not by itself close off that convenience at the dealer workshop.

Telling buyers about the open platform

The paper also proposes that dealers must prominently inform customers, at the point of vehicle sale, about the Market Infrastructure Institution platform, known as Bima Sugam. The idea is that a buyer standing in a showroom knows there is an open marketplace where motor policies for new and existing vehicles can be compared and bought. The draft further proposes that insurer-promoted platforms be set up as not-for-profit companies by at least 11 insurers.

Commission and who may sell

On money, the draft proposes remuneration on new-vehicle motor policies at nil for the third-party portion and 5% for own-damage and related covers. It proposes replacing the current Motor Insurance Service Provider framework, usually shortened to MISP, with an Insurance Distribution Entity regime. And it opens the door for non-dealer garages to sell motor insurance as associates, so the independent workshop that services your car could also offer a policy.

A Draft, Not a Rule Yet

Everything above is a proposal. A consultation paper sets out what the regulator is considering and asks the industry and the public to respond. Comments closed on 25 October 2026. The regulator now reads them and decides what to notify as final regulations, and that can take time. Expert commentary reported so far expects the final regulations to be less stringent than the draft, which is a common pattern after consultation.

So, for now, the cashless-repair proposal does not give you a new right you can quote at a workshop counter. If a dealer workshop and your insurer do not have a cashless arrangement today, the reimbursement route still applies: pay, collect the itemised bill, claim. What the draft does is signal the direction the regulator is looking in. We will update this page if and when final regulations are notified.

You Already Have the Right to Choose Your Insurer

One point should not get lost. Nothing stops you, today, from buying your motor policy from any insurer you choose, directly or through any licensed intermediary. That is true for a new car and for a used one. The draft is not about creating that freedom. It is about making sure that exercising it does not cost you convenience afterwards, and that buyers know their options at the moment they are most likely to sign whatever is put in front of them.

For a used-car buyer, that freedom is worth more than it sounds. The seller's policy may be with an insurer whose garage network does not suit you, or may be a bare third-party policy when you want own-damage cover. You can take a fresh policy from any insurer the day the car becomes yours. Our tip on renewing versus taking a new policy walks through when each makes sense.

The Real Risk in a Used-Car Deal: The Gap at Transfer

Here is the part most buyers learn the hard way. When a car changes hands, the insurance on it does not simply carry on in the buyer's favour for the rest of the policy year. The law gives it a short bridge, and after that the own-damage side falls away unless someone acts.

Section 157 and the 14-day window

Section 157 of the Motor Vehicles Act, 1988 says that when ownership of a vehicle is transferred, the certificate of insurance is deemed to be transferred to the new owner as well. That is the comforting half. The other half is in the same section: the new owner must apply to the insurer within 14 days of the transfer for the necessary changes to be made to the certificate and the policy.

In standard industry practice, this works out as follows. The third-party cover, which is the part the law requires every vehicle to carry, continues for that 14-day period so the car is not on the road uninsured. The own-damage protection, which pays for repairs to your own car after an accident, theft, fire or flood, depends on the policy being endorsed to the new owner's name. If you drive the car for six weeks without telling the insurer and then put it into a wall, you may find the own-damage claim goes nowhere because the policyholder on the paper is still the seller.

The practical rule is simple. The day the RC transfer is done, apply to the insurer to move the policy into your name, or buy a fresh policy from an insurer of your choice. Do not let the 14 days run down while the paperwork sits in a drawer. Our earlier report on the three-year third-party policies on newer cars covers a related point: a long-term third-party policy sold with a new car follows the vehicle too, but it says nothing about own-damage cover for the second owner.

NCB Belongs to the Seller, Not the Car

The no-claim bonus is a discount on the own-damage premium earned by not claiming, year after year. It is easy to assume it comes with the car. It does not. In industry practice, the NCB belongs to the policyholder, not the vehicle. When the seller lets the car go, they can ask their insurer for an NCB retention or transfer certificate and use the discount on the policy for their next car.

For the buyer this means two things. First, do not pay extra for a car because the seller says it has "full NCB". That bonus is leaving with them. Second, when the policy is endorsed to your name, or when you buy fresh, the own-damage premium is worked out without the seller's NCB, so budget for a higher figure than the seller was paying. Two-wheeler buyers face the same point, and our tip on checking insurance and NCB on a used two-wheeler explains how the certificate works.

IDV Resets for the Buyer

The Insured Declared Value, or IDV, is the sum the insurer will pay if the car is stolen or written off. It is set when the policy is taken and is tied to the car's age and the insurer's depreciation schedule. When the policy moves to a new owner, or the new owner buys a fresh policy, the insurer sets an IDV for the buyer. Depending on the car's age and the insurer's grid, it may land close to the figure on the seller's policy or some way below it, and the premium moves with it.

Do not treat the seller's IDV as the car's value, in either direction. It is an insurance figure, not a price guide. What it does tell you is how the car was insured, and whether the seller kept the cover realistic or set it low to save on premium. Our tip on IDV in used-car insurance explains how to read it and how to choose yours.

Check Insurance Validity on the Record Before You Pay

Everything above assumes there is a live policy to transfer. Sometimes there is not. A seller may let the policy lapse during the months a car sits unsold, or may hold a third-party policy and describe it as "insured" without saying what kind. Both are legal positions you can deal with, but only if you know before the money moves.

The Rs. 99 RC check reads the car's record on the VAHAN database and shows the insurance validity date recorded against it. Alongside that it shows the RC status, owner serial, registration date, the lender flag and the blacklist flag. If the validity date is in the past, you know the car is being sold without a current policy and that you will need to buy one before you drive it away. If it is far in the future, you know there is a policy to transfer, and the 14-day clock starts the day the RC changes.

If you also want to see pending traffic challans on the car, the Full Report at Rs. 149 returns the RC fields and the challan search together on one registration number.

The Wider Push on Insurance Compliance

The IRDAI draft is one strand of a broader move to get more vehicles insured and to catch those that are not. On 4 August 2026, a Supreme Court bench of Justices Sanjay Karol and Prashant Kumar Mishra, as reported by Coverfox, Jurishour and Legal Republic, directed that new private cars carry third-party cover for 4 years and new two-wheelers for 6 years. The court also gave directions to integrate ANPR cameras with insurance and VAHAN data so that uninsured vehicles can be e-challaned.

The scale of the problem explains the urgency. The court recorded that about 56% of vehicles on Indian roads are uninsured, 16.54 Crore out of 30.48 Crore, citing the Standing Committee on Finance report for 2024-25. We looked at the camera side of this in our report on the no-insurance, no-fuel ANPR pilot, and at how premiums may change for individual drivers in our piece on risk-based motor premiums and named drivers.

For a used-car buyer, the direction is clear. A car with a lapsed policy is increasingly likely to be noticed by a camera, not just by a traffic officer. The insurance validity date on the record is no longer a formality to tidy up later.

Sellers: Keep the Policy Live Until the Transfer Is Done

If you are selling, the same facts work in your favour. A car with a current policy and a clear validity date on the record is an easier sale than one where the buyer has to arrange cover before the test drive. Keep the policy running until the RC transfer is complete, then collect your NCB certificate from the insurer so the discount follows you to your next car.

A verified listing on VahanBazaar is built from the VAHAN record on your registration number, so buyers see the RC status, registration date, owner count and lender flag from the record rather than from your description. The listing costs Rs. 99, with no commission. On average, based on VahanBazaar listings data, verified listings get about 3x more enquiries and sell roughly 40% faster.

What This Means for Used Car Buyers

The IRDAI draft, if it becomes final in anything like its current form, would make life a little simpler for owners who shop around for insurance: cashless repair at the dealer workshop regardless of where the policy came from, and a clear pointer to the open platform at the point of sale. That is worth watching, and we will report on the final regulations when they come.

But the risk that costs used-car buyers money today is not about where you buy insurance. It is the gap between the RC transfer and the policy endorsement. Check the insurance validity date on the record before you pay. Read the policy schedule for the cover type and IDV. Apply to the insurer within 14 days of the transfer, or take a fresh policy from any insurer you prefer. Let the seller keep their NCB, and budget for a premium without it. Do those four things and the handover is routine.

This article is general information and not legal or financial advice. The IRDAI consultation paper is a draft and its proposals may change or may not be adopted. Insurance terms, endorsement procedures and transfer timelines differ by insurer and by state. Confirm the position with your insurer, your RTO and, where a loan is involved, your lender before you pay.