Its Banks Vs Insurers Over Bancassurance

The rift between banks and insurance companies was visible at a meeting convened by the Insurance Regulatory and Development Authority (Irda) today to discuss bancassurance.

Insurers rejected the proposal mooted by banks which sought permission to sell insurance products of more than one life and one general insurer in their role as corporate agents. They maintained that banks should set up brokerage outfits if they wanted to sell products of more than one company.

"There was reluctance among insurance companies to allow banks to sell more than one company's products," a bank chief who attended the meeting said.

"Why should an insurer be ready to train agents in banks if that agent is going to sell another company's product," said an insurer after the two-hour meeting. "Banks have to decide whether they want to merely provide service as it is done by brokers or own the customer as is done by the agents," he added.

With the meeting remaining inconclusive, the mater will be discussed again after IRDA works out a compromise formula. Arthur Andersen India's Ashwin Parekh, who attended the meeting, suggested that Irda and the Reserve Bank of India leave it to banks to decide whether they want to be a corporate agent or a broker.

According to Irda's stipulation, a corporate agent is allowed to sell only one insurer's products while brokers are allowed to sell products of many companies.

Insurance companies which plan to use the bancassurance model in India are of the opinion that it is the only route for new companies to reach out to remote areas without having to open separate branches.