Insurance companies promoted by non-banks may soon be on a level playing field with bank-promoted insurers.
According to the guidelines being planned by Insurance Regulatory and Development Authority (IRDA), banks which opt to be insurance brokers, will have to cap business from their own group companies at 25%.
This means banks cannot push for products from their own group companies beyond 25% of the total annual sales. For example, if State Bank of India (SBI) becomes a broker, its total insurance sales from SBI Life Insurance will be restricted to 25%. There will be similar cap for general insurance business.
Most major banks such as ICICI Bank, HDFC, Bank of Baroda, Bank of India, SBI, Canara bank, Punjab National Bank, Andhra Bank and IDBI have promoted insurance companies.
With many banks starting their own insurance ventures, newer, non-bank promoted insurers have been finding it difficult to find distribution partners with a wide network.
Under the current existing norms for distribution, a bank can only become a corporate agent, which allows it to sell products of one life insurance Company, one non-life insurance company and one standalone health insurance Company.
In his budget speech, Finance Minister P. Chidambaram had said that banks would be allowed to act as brokers to sell insurance to help improve penetration through the extensive national bank network.
These steps will ensure that there will be no selective selling by banks and provide a good platform for products of all insurance companies.
Also, to prevent mis-selling of policies through the bank channel, the IRDA will specify norms which require extensive training of the bank personnel selling insurance products, besides a strict compliance with Know Your Customer (KYC) norms.
According to the guidelines being planned by Insurance Regulatory and Development Authority (IRDA), banks which opt to be insurance brokers, will have to cap business from their own group companies at 25%.
This means banks cannot push for products from their own group companies beyond 25% of the total annual sales. For example, if State Bank of India (SBI) becomes a broker, its total insurance sales from SBI Life Insurance will be restricted to 25%. There will be similar cap for general insurance business.
Most major banks such as ICICI Bank, HDFC, Bank of Baroda, Bank of India, SBI, Canara bank, Punjab National Bank, Andhra Bank and IDBI have promoted insurance companies.
With many banks starting their own insurance ventures, newer, non-bank promoted insurers have been finding it difficult to find distribution partners with a wide network.
Under the current existing norms for distribution, a bank can only become a corporate agent, which allows it to sell products of one life insurance Company, one non-life insurance company and one standalone health insurance Company.
In his budget speech, Finance Minister P. Chidambaram had said that banks would be allowed to act as brokers to sell insurance to help improve penetration through the extensive national bank network.
These steps will ensure that there will be no selective selling by banks and provide a good platform for products of all insurance companies.
Also, to prevent mis-selling of policies through the bank channel, the IRDA will specify norms which require extensive training of the bank personnel selling insurance products, besides a strict compliance with Know Your Customer (KYC) norms.
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