The Insurance Regulatory Authority of India (Irda) has convened a meeting of the chief executives of all insurance companies next week to put the necessary framework and facilitate the smooth entry of banks to act as insurance brokers.
“We know that some banks are against the proposal to become insurance brokers for multiple players. We have called the CEOs of life insurance companies on January 16 and non-life players on January 17 to discuss the banks’ entry. We will discuss about distribution channel developments,” said Irda member (distribution) DD Singh. The chiefs of PSU banks had received a letter from the finance ministry requesting them to become insurance brokers, within the framework as proposed by the RBI and the Irda.
The new policy will allow banks to sell policies of more than one insurer. Currently, banks are allowed to sell products of one life and one non-life insurance company as a corporate agent.
However, banks have opposed the idea of becoming brokers for multiple players. “We are not comfortable about becoming brokers for other insurance companies promoted by my competing banks. We have a tie up with the insurance subsidiaries (life and non-life) promoted by our bank,” said the chief of a nationalised bank who preferred anonymity.
Almost all PSU banks have promoted their own insurance companies and many of them have tied up with foreign insurance companies. The government is keen that banks take up the business of multiple insurance players in view of their wide reach and branch network.
“Banks are worried about being held accountable for mis-selling. Irda can take action against banks if they are caught violating the norms,” said an Irda source.
Indian Banks Association chief executive MV Tanksale had said each bank board is discussing in detail on how to take this issue forward. Each bank is in a different arrangement with insurance companies. While some are joint ventures, others are just corporate agents. The IBA stand is that a thumb rule cannot be applied to the situation and each bank board should have the discretion about becoming brokers for many insurers.
The RBI, in its draft norms, has decided to permit banks to undertake insurance broking business departmentally, subject to the requirements, including the minimum net worth of Rs 500 crore.
Overhaul of customer service rules likely
The insurance sector is likely to witness major changes in customer services, considered as a big headache in the financial sector. The Irda is considering changes in the customer services protection guidelines, Irda member (distribution) DD Singh said on Wednesday.
Irda has also set up a committee headed by Singh to advise the regulator on customer services. The committee has members from life insurance firms, non-life companies, and Life and General Insurance Council, Singh said at a seminar organised by Asia Insurance Post.
“We have asked all insurance companies to submit their citizen charters. We are also looking at the possibility of having product-specific citizen charters as well,” Singh said. (Ens)