The Hindu Business Line : Andhra Bank may delay selling own insurance products

Hyderabad, Nov. 5 Andhra Bank may go slow on selling the products of its insurance joint venture with Legal & General and Bank of Baroda due to its tie-up with Life Insurance Corporation of India.

The joint venture had recently obtained approval from the Insurance Regulatory and Development Authority. The products are being made ready for a possible roll-out next year.

However, the bank is finding itself in a rather unusual situation as it has been a major seller for LIC’s offerings through its bancassurance channel as a corporate agent.

The bank had more than once topped the list of banking partners for LIC and earned significant fee-based income in the form of commission The commission last year was Rs 11.70 crore, after sales of over 1.40 lakh policies. It also has an exclusive team to sell LIC’s products.

While the bank cannot sell the products of LIC once the joint venture is operational, it is unhappy with the possibility of losing trail commission from LIC.

“This is the commission which comes after completing five years of the agreement (with LIC). If we end the relationship before the completion of five years (before March 2010) we lose the commission. So we may start selling our joint venture insurance products slightly late,” Mr R.S. Reddy, Chairman and Managing Director, Andhra Bank, told Business Line.

Such a move would not cause any disadvantage as the bank would continue to benefit from sale of joint venture products as an equity partner, he said.

The combined customer base of Bank of Baroda and Andhra Bank (over 40 million) was itself a big advantage to the insurance joint venture, Mr Reddy said.

From LIC’s perspective, the loss of a major corporate agent and the competition from the proposed venture is a matter of concern, say experts.

“It is expected that more banks may enter life insurance either individually like SBI or through joint ventures. LIC has certain inherent strengths and will devise innovative marketing strategies,” a senior LIC official said.

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