Irda: Banks' insurance broking model to gain traction in time

Notwithstanding the tepid response by banks to act as brokers for selling products of multiple insurers, sectoral regulator Irda is hopeful that this model will pick up in due course even as it said it is renewing the corporate agency licence of banks as of now.
"We have brought out the guidelines for banks acting as insurance brokers. We expect this to happen in due course of time. It can't be abrupt. It takes some time...," Insurance Regulatory and Development Authority (Irda) chairman TS Vijayan said on the sidelines of a global conference of actuaries here today.
Asked about banks's reluctance to act as brokers, Vijayan said, "Some banks are reluctant as many of them have already entered into tie-ups with insurers," he said.

He wondered when an insurance company owns a bank, a case in many western economies, whether it will do only insurance business.
He, however, said no timeline has been fixed for banks to act as insurance brokers.
Last year, Irda had released final guidelines on bancassurance, which allowed banks to sell insurance products of many companies. However, the new model has not picked up as many banks have floated their own insurance subsidiaries or have tied up with one insurer or other exclusively.

Meanwhile, talking on the need for correct pricing of insurance products, Vijayan said actuaries play a critical role in determining prices.

"Actuaries should not be swayed by short-term goals. They should see that customers get a better deal," he said, adding that there has to be a balance between policyholders' interest and company's interest.
Emphasising on correct pricing of general insurance products saying non-life companies should not only chase topline, Vijayan said there is a need of actuaries in the general insurance companies as well.
The comment has come at a time when general insurers have seen price wars in commercial lines of businesses in the recent past.
The regulator also raised concern on the persistence levels of life insurance industry, saying product design is very crucial for high persistence and also stressed on lowering expense ratio.

Asked about the premium for third party motor insurance for the next fiscal, Vijayan said the regulator has put out an exposure draft and decision would be taken after receiving feedback from all stakeholders.