While the finance ministry is keen on banks to act as brokers for insurance firms, the lenders themselves do not sound too enthusiastic. In his Budget speech last month, finance minister P Chidambaram had stated that after due permissions from concerned regulators, banks will be allowed to tie up with multiple insurance companies to sell life and general insurance products.
Under the present bancassurance structure, banks are allowed to tie up with only one life and one non-life insurance player, each. Moreover, many leading banks also promote insurance companies of their own, so it would not make sense for them to tie up with another player.“It is an opportunity, but at this point in time, we are not considering the brokerage model because we already have our own insurance firm,” said KVS Manian, group head (consumer banking), Kotak Mahindra Bank.Bankers believe that the current partnership model will always score above a broker model because it has more involvement from the bank and the insurance company.
“We want the insurance company to be answerable to the kind of products being sold to our customers. In a broker model it would not be very effective,” said a senior official from a leading private sector bank.Bankers like M Narendra, chairman and managing director, Indian Overseas Bank, are still waiting for Insurance Regulatory and Development Authority (Irda) to come out with final guidelines on bancassurance, before considering a broker model.Insurance players on the other hand sound pessimistic about banks entering the market as brokers.
The industry, which was under a cloud for charging usurious premiums before the regulator stepped in to lower the charges, now hopes that there won’t be another bout of misselling.
“We are not at a stage in the evolution of insurance companies, where this move can be implemented. Banks which do not completely understand the insurance products may lead to mis-selling,” said a senior official with an insurance company, seeking anonymity.
The insurer also felt that the move may inspire undercutting of business by some private players who may end up paying higher commissions to banks to get more visibility for their products.
Irda’s annual report (2011-12) said maximum complaints in the life insurance sector were related to malpractices and accounted for 34,799 complaints out of 100,770 complaints in unfair business practices. In the non-life sector, maximum complaints were policy related, accounting to 38,076 complaints out of 93,155 complaints in the year.
“In my view, the reason why insurance is stumbling in India is because of mis-selling of products and complex products. If you want to sell insurance to India, you must sell simple products and must make it absolutely clear to agents and other officers that they should not mis-sell,” the FM had said last month.
RBI too had shown apprehensions about banks acting as insurance brokers, stating that it may lead to reputational risks. Some private insurers are happy, nevertheless. The move will help them improve the reach of their products in areas which they could have otherwise not been able to touch. The strong presence of public and private sector banks in smaller cities and villages is a big positive they said.
“If this works out, it will promote competition among insurance companies and customers will be given various options to choose from,” said AS Narayanan, chief distribution officer, Bajaj Allianz Life
“We are not at a stage in the evolution of insurance companies, where this move can be implemented. Banks which do not completely understand the insurance products may lead to mis-selling,” said a senior official with an insurance company, seeking anonymity.
The insurer also felt that the move may inspire undercutting of business by some private players who may end up paying higher commissions to banks to get more visibility for their products.
Irda’s annual report (2011-12) said maximum complaints in the life insurance sector were related to malpractices and accounted for 34,799 complaints out of 100,770 complaints in unfair business practices. In the non-life sector, maximum complaints were policy related, accounting to 38,076 complaints out of 93,155 complaints in the year.
“In my view, the reason why insurance is stumbling in India is because of mis-selling of products and complex products. If you want to sell insurance to India, you must sell simple products and must make it absolutely clear to agents and other officers that they should not mis-sell,” the FM had said last month.
RBI too had shown apprehensions about banks acting as insurance brokers, stating that it may lead to reputational risks. Some private insurers are happy, nevertheless. The move will help them improve the reach of their products in areas which they could have otherwise not been able to touch. The strong presence of public and private sector banks in smaller cities and villages is a big positive they said.
“If this works out, it will promote competition among insurance companies and customers will be given various options to choose from,” said AS Narayanan, chief distribution officer, Bajaj Allianz Life
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