India, June 25 -- When someone buys car insurance in India, it's generally assumed that most of the premium goes towards insurance coverage. However, this is often not the case.

On a Rs.50,000 motor insurance premium for a new car, an insurer may pay Rs.20,000 to Rs.30,000 to the dealer or intermediary that sold the policy. That amounts to 40% to 60% of the premium paid by the consumer.

"The true price of the product may be Rs.20,000-Rs.30,000," an industry source told Inc42. "But the customer ends up paying almost double because of the commission component."

To address this, the Insurance Regulatory and Development Authority of India (IRDAI) has come out with a consultation paper. The regulator has proposed that insurance intermediari...