The Reserve Bank of India (RBI) in its Financial Stability Report has raised concerns about the conduct of banks while distributing insurance products.RBI said in some cases it was observed that banks did not have clear segregation of duties of marketing personnel from other branch functions.
Bank employees were directly receiving incentives from third parties such as insurance companies, mutual funds and other entities for selling their products.According to current rules of the Insurance Regulatory and Development Authority (IRDA), a bank is permitted to sell insurance products of one life insurance company,.
One non-life insurance company and one standalone health insurance company. There have been some cases of insurance company’s directly incentivising bank staff to increase sales. But this is not an industry-wide phenomenon and wherever there have been some discrepancies, both RBI and IRDA have initiated appropriate action.
RBI said in some cases, direct incentives to the bank staff have created distortions in the sales structure.
Deploying insurance personnel to sell products at bank branches leads to a conflict of interest. Hence, IRDA prohibits this practice and encourages bank staff to sell policies, only in line with a customer’s need.
Since a significant portion of private life insurance companies use banks as corporate agents, there seems to be an urgent need to revisit the marketing and sales strategies adopted by banks in pushing such products, especially since insurance is among the more complex of financial products for common man to fully comprehend, said RBI.
Bank employees were directly receiving incentives from third parties such as insurance companies, mutual funds and other entities for selling their products.According to current rules of the Insurance Regulatory and Development Authority (IRDA), a bank is permitted to sell insurance products of one life insurance company,.
One non-life insurance company and one standalone health insurance company. There have been some cases of insurance company’s directly incentivising bank staff to increase sales. But this is not an industry-wide phenomenon and wherever there have been some discrepancies, both RBI and IRDA have initiated appropriate action.
RBI said in some cases, direct incentives to the bank staff have created distortions in the sales structure.
Deploying insurance personnel to sell products at bank branches leads to a conflict of interest. Hence, IRDA prohibits this practice and encourages bank staff to sell policies, only in line with a customer’s need.
Since a significant portion of private life insurance companies use banks as corporate agents, there seems to be an urgent need to revisit the marketing and sales strategies adopted by banks in pushing such products, especially since insurance is among the more complex of financial products for common man to fully comprehend, said RBI.
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