Tie-up with multiple insurers for banks to be optional

Corp agents given an option to tie up with up to nine insurers, three each in life, non-life and health

The Insurance Regulatory and Development Authority of India (Irdai) has decided that corporate agents (including banks) can tie up with up to three life, non-life and health insurers each for distribution of insurance products. However, this will not be made mandatory, said Nilesh Sathe, member-life, Irdai said.

Speaking on the sidelines of an insurance conference organised by Dun & Bradstreet (D&B), Sathe said corporate agents would be given an option to tie up with nine insurers. Thus, banks can decide to continue with the existing bancassurance arrangement, or tie up with more insurers.

Sathe also said they are reviewing other guidelines, including sum assured not being paid for suicide-related claims after reinstatement of the policy. He said it was not fair that a customer pays premium for several years and when suicide instances happen after reinstatement of policy due to lapsation, suicides in that year are not given full sum assured but only premium refund.

Also with respect to agents, he said Irdai is looking into norms to see if simpler products could be sold by agents without any major examination. He added for complex products like annuity or unit-linked products, they can be made to take two-three day training and a test. The regulator has already taken a hit of Rs 35 crore since licensing fee from individual agents collected by Irdai has been discontinued, he added.

Highest NAV products were discontinued from the market due to misselling and false claims of high returns. Sathe explained that if companies now send such products for approval, they may look into them. "We are not averse to these products," he said

Bancassurance will be a major reform by Irdai in the next few weeks. As per current rules, corporate agents (like banks) can tie up with only one life, one non-life and one standalone health insurance company as part of the distribution tie-ups. These norms will be gazetted in the next few days and published.

Irdai in its earlier draft had done away with the capping of insurance business from one insurer by a bank. In its first draft, Irdai had mandated banks to cap business from one insurer to 50 per cent; Irdai has removed this cap.



This would mean that those insurers without a bank partner or promoter would still have to wait longer to get business from bancassurance. The regulator has said an insurer can have tie-ups with up to three insurers in any line of business — life, non-life or health.

In FY15, insurers with bank partners or promoters had an increase in the business from bancassurance.

The industry almost gets 55-65 per cent business from the bank channels.



Irdai, in an earlier draft on corporate agents released in March, had said no corporate agent (including banks) can get more than 90 per cent of the premium from any one insurer in the first year.

It had said this limit should gradually come down to 75 per cent and 60 per cent during the second year and third year, respectively. From the fourth year onwards, it said this limit should not be more than 50 per cent.

Industry sources said banks, especially large public sector banks, had approached the finance ministry and requested that the cap be removed, since otherwise their valuations could take a hit. They also added if it was optional, not all banks would open up their network.