HDFC Bank ties up with Bajaj Allianz

HDFC Bank, the country's second largest private sector bank, has decided to end its four-year-old bancassurance partnership with group firm, HDFC Chubb General Insurance Company. HDFC Chubb is 74 per cent owned by Housing Development Finance Corporation (HDFC), the promoter of HDFC Bank.

The general insurance company has been going through a rough weather due to differences between the two joint venture partners, HDFC and Chubb. The partners recently agreed to part ways, but the modalities are still to be worked out.

HDFC Bank has finalised a new bancassurance partner in Bajaj Allianz General Insurance Company, sources in the bank said. The bancassurance alliance is likely to be announced soon.

HDFC Bank expects to earn commission income of Rs 50 crore per annum from selling Bajaj Allianz's products, against just Rs 5 crore now through it alliance with HDFC Chubb.

Bajaj Allianz will get access to HDFC Bank's customer base of over 10 million across 531 branches spread over 228 cities across India.

Two months back, HDFC Bank had invited insurance companies to present their credentials for forming an alliance with it. Besides Bajaj Allianz General Insurance, ICICI Lombard General Insurance and Reliance General Insurance had also bid for tying up with HDFC Bank. Reliance General had even offered the bank to pay the expected commission income in advance.

Besides getting better incentives, a prime reason for HDFC Bank to end its tie up with HDFC Chubb was the latter's limited range of products. The bank could sell just personal accident and motor insurance.

With the new tie up, HDFC bank, a big provider of home loans will be able to sell mortgage insurance, householders' insurance, property insurance besides health insurance, SME insurance and various retail insurance products to its customers.

An industry source said, "Bajaj Allianz offered better terms. It makes economical sense to go with one who is offering better incentives. HDFC Chubb couldn't meet their (HDFC Bank's) expectations as it was offering the normal agency commission."

Bajaj Allianz was found strong on service levels, credibility and strong tie-ups with banks. The insurer has a tie up with over 20 banks including UTI, IDBI, United Bank of India, Jammu and Kashmir bank.

On the other hand ICICI Lombard has tie up with four banks-ICICI Bank, American Express Bank, Centurion Bank and ABN Amro Bank.

As per Insurance Regulatory Development Authority of India (IRDA) norms, a bank earns a commission of 15 per cent for selling a non-tariff product while it is 10 per cent on a tariff product.

For life insurance, HDFC Bank will continue selling HDFC Standard Life Insurance products. It has already removed links to HDFC Chubb General insurance products from its website.