The Hindu Business Line : IRDA lets banks take agency licences; pvt cos kept out

IN what could unleash a fresh wave of bancassurance tie-ups, the Insurance Regulatory and Development Authority (IRDA) has partially lifted the moratorium on grant of fresh corporate agency licences by opening the licencing window for the banking sector.

However, the regulatory ban on issuing fresh licences to private sector companies to act as corporate agents of insurers would continue to remain in force.

To ensure penetration of insurance products in rural areas, the IRDA has also agreed to grant agency new licences to self-help groups (SHGs) and non-governmental organisations (NGOs).

"We have decided to partially lift the ban on issuing fresh licences to corporate agents. I have written to insurance companies allowing them to go ahead with formalising new agreement with banks, RRBs, SHGs and NGOs," the Chairman, IRDA, Mr C.S. Rao, told Business Line.

The insurance regulator had imposed a moratorium on issuance of fresh corporate agency licences earlier this year after it had noticed widespread instances of what is commonly referred to as `misselling' in insurance parlance.

Misselling refers to the practice of agents attempting to sell insurance products without adequate knowledge of the products or without going through the requisite training regime stipulated by the regulator.

Mr Rao said that IRDA still had concerns over practices adopted by private companies. "Banks are responsible entities that are least likely to flout the IRDA norms. That is why we decided to open the licencing window for them. Private companies have to wait for some time. They are the real problem," he said.

The banking sector has been one of the biggest props to the Indian insurance industry. Companies in both the public and private sector have been making fresh inroads into the market through the banking network that spreads across the country.

Most insurance companies have, by now, entered into several bancassurance tie-ups through which insurers and the banks enter into agreements whereby the latter markets and distributes the insurance products through their various branches against a fee charged against the business generated through them.

However, while insurers can join hands with more than one bank for such distribution agreement, banks on their part are limited to have tie-up with only one insurance company.

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