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Banks working as insurance brokers is expected to expand insurance penetration and offer more choice to customers, say insurers.
The Reserve Bank of India (RBI) on Friday issued the much-awaited draft guidelines permitting banks to act as insurance brokers in the aftermath of similar guidelines issued by the Insurance Regulatory and Development Authority (IRDA) earlier.
At present, banks are allowed to function only as a corporate agent to sell policies of only one company each from life and non-life segment.
``It is nice that the draft guidelines have been issued signifying some movement from the banking regulator,’’ said P Nandagopal, Managing Director and Chief Executive Officer of India First Life Insurance Company.
Once this draft guidelines translate into reality, the new norms might cause some disruption initially but some logic would come over a period of time as those who were now working as corporate agents might switch over to become brokers, he said.
``In any case, liberaralisation of distribution will help in the long by creating a level playing field in non-digital space,’’ he added.
Manoj Kumar Jain, CEO of Shriram Life Insurance Company feels that banks turning into insurance brokers would give more choice to customers in choosing insurance products.
``As of now a small proportion of banks (not more than 15,000 branches) are selling insurance. The proposed norms will help expanding this distribution base and penetration of insurance,’’ he added.
As per latest data of IRDA, life insurance penetration is only 3.86 per cent of Gross Domestic Product (GDP) of the country.
However, it remains to be seen how banks would act. The managing director of a public sector bank, who does not want to be named, said a problem for banks to work as brokers would be training of staff in insurance sale the burden of servicing the policy after sales. ``But we will have to chip as other income/fee-based income could be mopped up,’’ he added.
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