Money & Banking

Banks can now sell policies of multiple insurance firms

Our Bureau Mumbai | Updated on February 28, 2013

BL01INSURANCE

The Finance Minister P Chidambaram appears to have settled the sticking point between the insurance and banking regulators on allowing banks to act as insurance brokers.

In his budget speech the Finance Minister announced that banks will act as brokers for selling insurance products of multiple companies. 

At present, banks can sell products of one life, one non-life and a standalone health insurer. The bancassurance guidelines are still under consideration of the Insurance Regulatory and Development Authority (IRDA). Reserve Bank of India (RBI) had recently expressed concerns about banks becoming brokers. 

Sunil Sharma, Chief Actuary, Kotak Life, said “There may be some operational issues as banks will have to train their resources. However, from an insurer’s stand point it will lead to competition and the consumer will have access to the products of all insurers under one roof.” 

“We feel that Banks promoting specific insurance companies may not be interested in this development; however by allowing banks to offer products from more than one insurer will lead to customers making an informed choice based on variable factors, such as premiums, exclusions etc,” said Miranjit Mukherjee, CFO & Senior Vice President-Finance, Tata AIG General Insurance.

 

“With banks being allowed to act as brokers and sell insurance for all insurers this opens up a completely new challenge for insurers. What I as a consumer would want to be wary of is mis-selling, in order to push a product over the other. We could see increase in mis-selling which could be a dampener,” said Yashish Dahiya, CEO & Co-Founder, Policybazaar.com.

In a bid to boost insurance penetration, Chidambaram has allowed insurance companies to open branches in non-metropolitan cities without approval from the insurance regulator.

In his budget speech, Finance Minister said all towns with population above 10,000 will have one Life Insurance Corporation office and one public sector general insurance company’s office by 2014.

To expedite the settlement of 10 lakh motor third party claims before Tribunals/Courts, Finance Minister has said that insurance companies will organise adalats to settle the claims. “This step will enable faster compensation settlement for victims,” said G Srinivasan, CMD, New India Assurance. 

According to Chidambaram, the know-your-customer (KYC) details gathered by banks will be sufficient to purchase an insurance policy, and group insurance products will now be offered to groups such as self-help groups, domestic workers' associations, among others. 

“Acceptance of the bank KYC is a huge positive and will facilitate convenience and seamless on-boarding of customers,” said Sandeep Bakhshi, MD & CEO – ICICI Prudential Life Insurance.

The Finance Minister also proposed to relax the eligibility conditions for life insurance policies issued on or after April 1, 2013 for persons suffering from disability or certain ailments by increasing the permissible premium rate from 10 per cent to 15 per cent of the sum assured. 

“The budget has not provided a separate limit for tax exemption for life insurance and pension or increased the exemption limits under section 80C. Life Insurance plays a critical role in providing long-term funds for infrastructure development by channelising domestic savings and could have helped in funding Rs.1 trillion planned to be invested in infrastructure during the 12th 5 year plan,” said Rajesh Sud, CEO & Managing Director, Max Life Insurance.

 

“The FM announced that insurance companies will be directly allowed to trade in debt market. It will mean some reduction in costs and may help deepen debt markets, which is required,” said Pavan Dhamija, Managing Director and CEO, DLF Pramerica Life Insurance. 

According to A S Narayanan, Chief Distribution Officer, Bajaj Allianz Life Insurance,  the move to allow insurance companies to become trading members of debt stock exchanges will bring down the cost for insurers.

deepa.nair@thehindu.co.in  

Published on February 28, 2013

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