With an aim to increase insurance penetration, Reserve Bank of India (RBI) has allowed banks to act as an insurance broker. Prior to this, banks were allowed to act as a corporate agent. As corporate agent, banks were allowed to sell products of only one life, one non-life and one health insurance company but now they can sell products of multiple insurance companies. But here question arises whether banks can be trusted.
Some say that banks can be trusted since they also generate revenue through the sale of insurance products while other argues that mis-selling will be a common problem.
At present, there are over 80 banks in the country with over 1.2 lakhs branches across the country. This can surely help to increase insurance penetration in the country.
Those in favour of banks say that since banks have all details of their customers they can ascertain their needs based on their loan and credit history. So, they can offer need-based expertise while selling insurance.
They also say that banks have physical presence everywhere, even in remote areas. Moreover, employees generally form a good rapport with long-term customers and provide useful tips on buying insurance.
While on the fillip side, experts say that with host of other products to sell, banks may not take a particular keen interest in selling insurance products. Moreover, even if they do sell, they may not take the need based approach instead of selling the plan which generates maximum revenue. This may result in mis-selling, which is the major concern in the insurance sector.
And also, unlike an agent who collects your renewal premium from your doorstep, banks will not extend this facility and the policyholder will have to take care of the renewal premiums and other facets of policies generally assigned to agents.
Though mis-selling is common in case of agents too, it is the sole responsibility of the customer to understand the complete terms and conditions before buying any insurance policy.
Banks may solicit expert financial advice, yet, that should not be blindly followed. Trusting banks as brokers is helpful because of the range of products available to choose from so that the best plan is chosen.
But to get a comprehensive understanding of all the plans, it is better to refer to online insurance comparison portals. Through online insurance comparison websites, you can get an unbiased view on all the products available in the market so that you can make informed decision.
Research is the key to sound portfolio be it through banks or through other distribution channels. So, do thoroughly research before making any decision.
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