IRCSL tightens motor insurance credit and mandates digital cards

​The Insurance Regulatory Commission of Sri Lanka (IRCSL) has issued a series of directives aimed at modernising the general insurance sector, curbing unauthorised brokering, and tightening financial discipline. 

A central piece of this regulatory overhaul is Direction No. 5 of 2026, which alters the premium collection landscape for motor insurance. Under the new rules, general insurance companies may grant a credit period to policyholders to settle their full motor insurance premiums, but this window is now strictly capped at a maximum of 30 days from the inception of the cover. This specific mandate will come into effect for all policies issued on or after May 1, 2026.

​In tandem with the tightened credit terms, the commission is pushing the sector into the digital age to align with national digitalisation goals and strengthen public security. Direction No. 06 of 2026 dictates that all licensed insurers engaged in motor insurance must transition to issuing only digital motor insurance cards to their policyholders. Furthermore, the regulator has outright banned the issuance of traditional physical cards, with the digital-only mandate also coming into force on May 1, 2026.

​The regulatory body has also taken decisive action to govern the relationship between insurers and financial institutions, such as licensed banks, finance companies, and leasing companies (BFLs). The commission observed that these entities were acting as insurance brokers and agents for their customers without being properly registered under the Regulation of Insurance Industry Act. 

To rectify this, Direction No. 4 of 2026 mandates that insurers can only accept business leads from BFLs through registered insurance brokers. The regulator emphasised that the fundamental right of a policyholder to select an insurance broker or agent of their choice must always be preserved. The commission explicitly warned against discriminatory action toward policyholders exercising this choice, stating that necessary regulatory intervention will follow if such behavior is brought to their attention.

​To further untangle the direct operational ties between insurers and BFLs, strict prohibitions have been placed on how insurers interact with these institutions. Insurers are now prohibited from providing insurance proposal forms or cover notes to BFLs to facilitate an advisory role to customers.  Additionally, insurers are banned from paying any form of consideration, whether monetary or otherwise, directly to BFLs, and they are strictly prohibited from accepting insurance premiums directly from them. If a registered broker compensates a BFL, that payment cannot exceed the maximum allowable agent commission rate. 

To prevent market monopolisation, a single broker is now restricted to serving a maximum of three BFLs at any given time. These sweeping changes governing financial institutions and the general insurance business will come into full effect on October 1, 2026.  (NF)