Corporate agents, including banks, may announce tie-ups with at least one more insurance company in the next fiscal. With Insurance Regulatory and Development Authority of India (IRDAI) seeking them to have an open architecture in the near future and the new arrangement will come into effect from April 1, 2016.
IRDAI officials have asked banks and other corporate agents to have board-approved policy on open architecture, among others, will include the approach to be followed by the corporate agent in having single or multiple tie-ups, the business mix, the type of products sold, grievance redressal mechanism and reporting requirements.
From the next financial year onwards, bank boards have been asked to required to give a clear plan about how and by when would they open up their branch network to more than one insurer in each category — life, non-life and standalone health.
Read more from our special coverage on "INSURANCE"
“With an extra nudge, banks will tie-up with more than one insurer in each category. However, majority business will continue to come from the old partners or the joint venture insurers if such agreements exist," said the head of distribution at a mid-size life insurance company.
Officials said that once banks start submitting their business proposals with bancassurance plans, IRDAI might insist on them tying up with more than one insurer. According to the new rules for licensing of corporates agents announced in September, banks can tie-up with up to three life, non-life and standalone insurers each, instead of only one insurance company earlier. However, this has not been made mandatory.
However, bank boards have been asked to disclose the approach in having single or multiple tie-ups, the partners in the tie-ups, the business mix, the type of products sold, grievance redressal mechanism and reporting requirements. Further, the board-approved policy has to address the manner of adopting the philosophy of open architecture.
Insurance company executives said this move by IRDAI is to ensure that no bank network in the future is available exclusively to only insurer.
The regulator did away with an earlier proposal on capping insurance business from one insurer by a bank. In the first draft on licensing of corporate agents, banks were asked to cap business from one insurer to 90% in the first year, and to 50% after four years or more.
Prior to this, banks were allowed to tie up as a corporate agent with only one life, one non-life and one standalone health insurer. This meant those insurers without any bank partners had no chance of selling insurance via this channel since a majority of this network had been utilised by bank-promoted insurers or older insurers who had already forged agreements with banks to sell insurance.