FinMin sets up panel to iron out insurance broking issues

In the wake of growing opposition from banks to a government directive on switching their insurance business to a broking model, the finance ministry today set up a panel comprising members from the RBI, Irda and bankers, to arrive at an amicable solution.
"It was decided that we will set a smaller group to work on the issue, representing banks, insurance companies, RBI and Irda, to come out with a solution that is acceptable to all. I think we should be in a position to resolve this issue very quickly," Indian Banks Association chief and PNB chairman KR Kamath told reporters at the customary post-policy press meet.

He was reacting to questions from reporters on the outcome of the meeting that bankers had with the financial services secretary Rajiv Takru here this morning on the insurance broking model order of the government, and where the decision was taken.
While accepting that the move is good and customer- centric, Kamath said, "The issue is how do you want to do it. So the issue is that instead of selling one company's product, banks should give option to customers. While each model has its own advantages and disadvantages, one particular model may not be the right way to do."

Another banker who attended the meeting with Takru said the government has also assuaged fears of the public sector lenders by levelling the field by stating that the insurance broking model will be applicable to private banks too.
The model implies that all banks will have to sell products of multiple insurance companies and not just their own or those from their bancassurance partners, as is the practice now.

The public sector banker, who wished not to be named also said, Takru put his foot down in stating that banks, including private sector ones, will have no option but to fall in line.

"If the private sector lenders think that the move will give them an edge over their public sector peers, let me tell you that this is an illusion. Once a regulatory directive is issued all the existing contractual obligations stand cancelled," Takru reportedly told the bankers, from SBI, PNB, Canara Bank BoB, ICICI Bank Axis HDFC Bank among others.
"If private banks don't fall in line and implement the directive, the regulator will have to issue a directive to them as well," Takru warned.
Last month's finance ministry directive to state-run banks to switch to insurance broking model, under which customers will get larger choice from several insurers, is criticised by banks who say they will be at a disadvantage to their private sector peers, as the diktat does not cover them.

It can be noted that most of the large state-run banks as well their private sector peers have their own insurance ventures.