Irda chief doesn't favour banks acting as insurers' agents

Comments after recent demand that banks be allowed to sell products of atleast 5 insurance companies in place of 1 in non-life segment

The Insurance Regulatory and Development Authority (Irda) chairman, T S Vijayan, on Wednesday said he would personally favour banks representing their customers rather than acting as agents of insurance companies.

His comments come in the backdrop of a recent demand by the Insurance Council that banks be allowed to sell the products of at least five insurance companies in place of the one company norm for each of the life and non-life segments. Banks sell insurance products acting as the agents of the respective insurance companies, which is called the bancassurance model.

Union finance minister P Chidambaram recently said it was desirable for banks acting as brokers where the fiduciary responsibility of the bank would be to the policyholder. A broker has a choice to sell products of more than one company, a move also favoured by the industry at large.

Vijayan said banks should ideally represent their customers, irrespective of whichever way their relationship with the insurance companies was defined.

One of the issues of bancassurance has been that many banks, including the country's largest, State Bank of India (SBI), have their own insurance subsidiaries and would rather promote the products of their sister concerns. In the present model, half of the insurance companies are said to have been left out of the bancassurance channel.

Vijayan said a variety of options, including the open architecture, are being considered before formulating the fresh guidelines for bancassurance. Bancassurance is an important channel for insurance penetration as the bank network has 100,000 branches spread across the country.

Vijayan added there would not be any disruption of business or product vacuum on account of the new product guidelines under which the companies have to replace new products with the existing ones.