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A corporate bank should be allowed to have only one insurance broking licence, a panel set up by Insurance Regulatory and Development Authority has said.
The committee, constituted by the authority to review the IRDA Broking Regulations 2002, submitted its report a couple of weeks ago.
As of now, banks are allowed to be corporate agent for only one insurer and there has been a demand to allow them to sell products of more than one. The panel’s views assume significance as a decision is pending with the regulator.
While pointing out that functioning of banks as insurance brokers would help increase insurance reach, it pointed out that there could be conflict of interest when a bank forms a broking firm as they are also promoters of some insurance companies.
“The Reserve Bank of India’s position on banks as broking firm also needs to be ascertained as it is the primary regulator of banks,’’ it suggested.
INDEPENDENT UNIT
The broking arm of banks should be an independent, account unit to be manned by exclusive staff trained by institutes imparting insurance related education.
The banks should have a board-approved policy in place to address the issues related to conflict of interest and the same should be filed with the authority, it said.
On sub-broking, the committee said it should be allowed for all insurance products and not merely retail personal products. Small banks such as cooperative banks and regional rural banks should be allowed as sub-brokers.
There should be a cap of Rs 1 lakh premium on policies to be procured by the sub-brokers, it said.
On the whole, the panel was in favour of bancassurance channel. “As they are separately regulated by RBI, there may be enhanced efficiency in insurance business and higher accountability to the policyholder as compared to the agency channel,’’ it said.
Banks accounted for 11.25 per cent of total new business premium collected by life insurers during 2011-12. The share was 36 per cent for private life insurers and 1.51 per cent for Life Insurance Corporation.
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