Online BusinessBanks may sell products of multiple insurers
Irda panel moots each lender tying up with two life, two non-life and two health insurers.
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Banks are likely to be allowed to sell insurance products of two life, two non-life and two health insurance companies.
Sources close to the development said that the Govardhan Committee, which is due to submit its report soon, has given a recommendation to this effect.
There are 23 life insurance companies, 22 non-life and two health insurance companies in the industry. Of this 11 life insurance companies and three non-life companies are sponsored by banks.
The Insurance Regulatory and development Authority (Irda) has formed this committee to look into the bancassurance model after a host of insurers had requested the regulator to relax the current rules of agency tie-up with only one company.
Banks either sell insurance policies of their insurance subsidiaries or promote products of insurers which give them higher commission.
Bank-sponsored insurance companies, however, had expressed their concerns on opening up the model, saying this would lead to higher mis-selling.
At present, banks charges 2-22 per cent commission from the insurance companies depending on the products. There are apprehensions among the insurers that this would also lead to competition in the commission paid by banks. Banks can enter into a tie-up for three-seven years with any insurance company.
“We are prepared for multiple tie-ups. Our preferred approach was one insurance company per bank, as we understand that the industry is not mature enough for this structure. It would not be in the interest of the customers,” said SBI Life Managing Director and Chief Executive Officer M N Rao.
Banks are low-cost distribution channel with high customer base and reach. Insurance companies, which are not promoted by banks, believe that an open architecture will help them bring down their expenses.
The latest entrants in the market are promoted by banks such as Star Union Daiichi Life Insurance, Canara HSBC Oriental Life and operate through bank branches and have opened few offices.
“Though open architecture is allowed in the UK, HSBC sells products only of HSBC Life and contributes 15 per cent to the total profit. The agency model has so far not been successful in India,” said Canara HSBC Oriental Insurance Chief Executive Officer Harpal Karlcut.
“Recent entrants in the market like us will have opportunity to work with banks. Banks will have better products and it will allow customers to have a bouquet of products,” said Future Generali Life Insurance Chief Executive Officer Deepak Sood.
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: OCT 5: Banks want exclusive deals