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 per cent.
This simply means banks cannot push for products from their own group companies beyond 25 per cent of the total annual sales. For example, if State Bank of India becomes a broker, its total insurance sales from SBI Life Insurance will be restricted to 25 per cent. There will be a similar cap for general insurance business.
Most major banks such as ICICI Bank, HDFC, SBI, IDBI Bank, Bank of Baroda, Canara Bank, Bank of India, Punjab National Bank, and Andhra Bank 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 become only a corporate agent, which allows it to sell products of one life insurance company and one non-life 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 there will be no selective selling by banks and provide a good platform for products of all insurance companies,” said a CEO of a private insurance company.
To specify norms
Also, to prevent mis-selling of policies through the bank channel, the insurance regulator will specify norms which require extensive training of the bank personnel selling insurance products, besides a strict compliance with KYC norms.
The regulator is expected to come out with the final norms soon under which banks will be able to sell insurance products of different companies.