Money & Banking

Private banks too may be allowed to sell policies of multiple insurers

| | Updated on: Jan 01, 2014

Final guidelines on bancassurance likely by Jan 15

In the new bancassurance policy, private sector banks are likely to be brought on par with their public sector counterparts.

The policy aims to allow banks to sell insurance policies of various companies as against the existing arrangement which permits them to sell policies of only one company.

Finance Ministry officials said discussions were on with banking and insurance regulators, Reserve Bank of India (RBI) and Insurance Regulatory and Development Authority (IRDA), before finalising the guidelines.

According to a senior IRDA official, the dialogue is on at an “appropriate” level to further widen the scope of the bancassurance channel by roping in private banks.

“The final guidelines to be framed are likely to have a mandate for private banks too as far insurance penetration is concerned,” he said, adding that the final guidelines are expected from RBI before January 15.

Feedback deadline The deadline for feedback on the draft guidelines for banks on bancassurance, issued by the RBI, ended on Tuesday. The insurance regulator was keen on fully leveraging the existing strengths of banks in terms penetration and customer reach for expanding insurance and offering the “best choice” to customers, he added.

Finance Minister P. Chidambaram in his 2013-14 Budget speech had said that banks would be permitted to act as insurance brokers so that their network of branches could be utilised to increase penetration.

Accordingly, the new guidelines are being finalised, which will allow banks as brokers to cap business from their own group companies at 25 per cent for life insurance and a similar cap for non-life insurance business. At the same time, the cap on selling policies of one company will be 50 per cent of the total insurance sales of a bank.

Will curb mis-selling Last month, Financial Services Secretary Rajiv Takru had said: “We will ensure that all insurance products are available through the one-lakh-plus bank branches. No renewals will be granted to existing corporate agency tie-ups of public sector banks and insurance companies.” He also hoped that chances of mis-selling would be less if banks become brokers.

Since most of the banks have promoted insurance companies, they are not very comfortable with the proposed scheme. However, there is feeling that with low insurance penetration, such a move will help banks expand their business, while providing more options to customers.

There are over one-lakh bank branches in the country today, with only about 15,000 engaged in selling insurance as corporate agents. Bancassurance accounted for 40 per cent of total premium collected by private insurers in 2012-13.

Published on January 01, 2014

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