Festive car sales and the insurance upsell: Competing for the same buyer

Dealers sell most new car insurance at the showroom, but buyers can buy the policy anywhere, and online quotes for the same cover are often lower. Dealers earn high commissions on these policies, so digital insurers try to reach the festive car buyer before delivery day.

Festive Car Sales in 2026 So Far

Festive car sales in 2026 are split across two months. Navratri fell in October, and Dhanteras and Diwali fall in November. Data from the Federation of Automobile Dealers Associations (FADA) shows 5,07,768 passenger vehicles registered in October. That was 14.23% lower than October 2025 but 18.86% higher than September.

FADA said the yearly fall came from a high base. In 2025, Navratri and Diwali fell in the same month, soon after the GST rate cuts. This year Dhanteras falls on 6 November and Diwali on 8 November.

Dealers expect more sales in November. In FADA's survey, 51.65% of dealers said they expect sales to grow this month. Every one of these new cars needs an insurance policy before it leaves the showroom.

Vehicle Insurance a New Car Needs Before Delivery

Vehicle insurance for a new car has two parts. Only one of them is a must. A vehicle insurance policy must have third-party cover (pays for harm you cause to other people) before the car goes on the road.

Own-damage cover (pays for damage to your own car) is optional, but most new car buyers take it. A policy with both parts is called a comprehensive policy.

Buyers can then add extra covers on top of the policy. Common ones for a new car are:

• Zero depreciation, which pays for replaced parts without a cut for wear
• Return to invoice, which pays the invoice price if the car is stolen or written off
• Engine protection, which covers engine damage from water on flooded roads
• Consumables cover, which pays for nuts, bolts, engine oil and similar items used in repairs

The other key number on every quote is the IDV (the maximum your insurer will pay if the car is stolen or written off). Two quotes can only be compared fairly when the IDV and the add-ons match.

Dealer Insurance and Online Insurance Side by Side

Dealer insurance and online insurance differ most in price and choice. The table shows the main gaps.

Buyers who compare car insurance online can see prices from many insurers for the same car. The cost is a little effort. The buyer has to match the engine and chassis numbers on the policy with the car. The showroom also needs a copy before the car is registered.

Why Dealers Push Their Own Insurance

Dealers push their own insurance because each policy pays them a commission. Many dealers sell insurance as a Motor Insurance Service Provider, or MISP (a dealer that sells policies for insurers).

IRDAI, the insurance regulator, gave the figures in a paper for public comment on 23 September 2026. Mint reported that dealers and brokers linked to car makers earned almost Rs 7,050 crore in commission in FY25. That was on Rs 29,000 crore of motor premium.

On new vehicles, dealers acting as MISPs earned an average commission of 38%. Brokers linked to car makers earned an average of 27%. Across all motor insurance, the average was 24%.

Between FY23 and FY25, motor premium grew about 34%, while motor commission grew about 259%. The paper found that the dealer, more than the customer, usually decides which policy the buyer gets.

When Online Insurers Can Reach the Buyer Before Delivery

Online insurers can reach the buyer in the days between booking and delivery. A valid policy has to be in place before the car leaves the showroom. A buyer who waits until the last day usually takes the offer from the showroom.

IRDAI's paper made the same point. At the moment of purchase, it said, customers are generally not in a position to compare or negotiate.

Digital insurers and comparison platforms try to reach the buyer before that moment. Their offer is choice: the buyer picks the insurer, the IDV and each add-on, and sees what each one costs.

A policy bought online can still be used for cashless repair at the showroom workshop. All it needs is a tie-up between the insurer and that workshop.

Steps to Compare a Dealer Quote and an Online Quote

Comparing a dealer quote and an online quote is easy if you start a few days before delivery.

1. Ask for a written quote with the insurer, the IDV, each add-on and the price.
2. Get two outside quotes with the same IDV and add-ons.
3. Check that each insurer has a cashless tie-up with your workshop.
4. Ask the showroom to match the lower quote or explain the gap line by line.
5. If you buy outside, match the engine and chassis numbers on the policy to the car.

A lower premium with a lower IDV is a smaller policy, so it does not count as a saving. If the car is stolen, the insurer pays only up to the IDV.

Can a Dealer Refuse Delivery If You Buy Insurance Elsewhere?

No, a dealer cannot refuse delivery because the buyer brought an outside policy. The policy has to be valid and match the details of the car, says Autocar India.

Autocar India also notes that IRDAI rules let buyers choose any insurer or agent. Some dealers still say cashless repair works only with their own policy. Cashless repair depends only on whether the insurer has a tie-up with the workshop.

If a dealer still insists, Autocar India suggests asking for the refusal in writing. The next step is to write to the customer care team of the car maker, with a copy to the showroom head. Buyers can also call the National Consumer Helpline at 1915 or IRDAI's grievance cell at 155255.

What IRDAI's Proposal Could Change at the Showroom

IRDAI's proposal could cut dealer commission on new car insurance. It would also show every buyer an online way to buy. The paper is called "Recalibrating Economics of Insurance Distribution". Its main motor proposals are:

• No commission for large sellers, such as dealer firms, on third-party cover for new vehicles, and 2.5% for agents
• Own-damage and other covers capped at 5% to 15%, based on the sales channel and the age of the vehicle
• Dealers to display the option to buy on a not-for-profit platform such as Bima Sugam, with a QR code
• Dealers barred from refusing cashless repair because the policy was bought elsewhere
• Carmaker incentive plans that reward dealers for insurance sales to be barred

Upstox reports that Bima Sugam is expected to start in the next four to six months, with its fee capped at 5% of the premium. These are proposals, and the final rules may differ. IRDAI extended the deadline for comments to 31 October 2026 after receiving over 650 comments.

What the Proposal Means for Dealers and Digital Insurers

For dealers, the proposal means less income from each new car policy. Debashish Banerjee of Deloitte India told NDTV that dealers have earned well from motor insurance for over a decade.

For digital insurers and online platforms, the proposal means a visible place inside the showroom. Banerjee said dependence on dealer-led selling may gradually reduce as awareness and digital use grow.

Shailaja Lall of Shardul Amarchand Mangaldas told NDTV that sellers may focus more on renewing policies and on service. The contest for the same buyer may then move from delivery day to renewal time.

Frequently Asked Questions

Is it legal to drive a car without insurance in India?

Driving a car without insurance on a public road is not legal in India. Every car must carry at least third-party cover, which pays for injury or damage you cause to other people.

Can I buy insurance for a new car after delivery?

Insurance for a new car has to be bought before delivery. A valid policy must be in place before you take the car and drive it, so buy the outside policy a few days early.

Does the place where I buy the policy affect my claim?

The place where you buy the policy does not decide your claim. Claims are settled under the insurer's terms and conditions, whether the policy came from a dealer or a website.

Are the proposed commission caps already in force?

The proposed commission caps are not in force yet. IRDAI released them for public comment in September 2026, and the final rules may change after it reviews the feedback.

Is online car insurance safe to buy?

Online car insurance is safe when you buy from a known insurer or an official platform. Check that the policy shows your name, the right engine and chassis numbers, and the correct IDV.

Key Takeaways

• Buyers can buy a new car policy from any insurer. A dealer cannot refuse delivery if the outside policy is valid and matches the car.
• Dealers earn high commission on new car policies. IRDAI's paper put the average for dealers acting as MISPs at 38% on new vehicles.
• Compare quotes with the same IDV and add-ons. A cheaper quote with a lower IDV pays less if the car is stolen.
• IRDAI has proposed lower dealer commission and an online buying option at the showroom. These are proposals, and the final rules may differ.