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Now, insurers without a bank partner or promoter will have to wait longer to get bancassurance business. The regulator has said an insurer can have tie-ups with up to three insurers, life, non-life or health.
Anup Rau, chief executive of Reliance Life, said, “Unless it is made mandatory, banks would not tie up with other insurers. Compared to other countries in Asia where there is open architecture as part of regulation and common practice, we do not have it. However, opening the bank network will become a reality.”
Currently, banks are allowed to tie up as a corporate agent with one life, one non-life and one standalone health insurer.
In FY15, bancassurance business for insurers with bank partners increased. The sector gets 55-65 per cent of its business from bank channels.
In a draft on corporate agents in March, Irdai had said no corporate agent (including banks) could get more than 90 per cent of the premium from a single insurer in the first year. It added this limit should fall to 75 per cent and 60 per cent during the second year and third year, respectively. From the fourth year, the limit shouldn’t exceed 50 per cent, it said.
Sources said banks, especially large public sector lenders, had approached the finance ministry and requested the cap be removed, saying if this wasn’t the case, their valuations would be hit.
“The regulator has given an option to choose whether one wants to remain a corporate agent to one insurer or tie up with more than one insurer. Making it compulsory wouldn’t be viable, as a lot of us have exclusivity arrangements with our promoter banks,” said the chief executive of a large bank-promoted private life insurer.
The regulator has said while seeking registration, a corporate agent has to file a board-approved policy on the manner of soliciting and servicing insurance products. Irdai has clarified this policy has to address the manner of adopting the open architecture and implementing it.
The policy would include the approach to be followed by the agent in having single or multiple tie-ups, the partners in the tie-ups, the business mix, the type of products sold, the grievance redressal mechanism and reporting requirements.
Banks (corporate agents) whose revenue from insurance intermediation exceeds 50 per cent of their overall revenue have to take out a professional indemnity insurance cover throughout the period of the registration granted to it by Irdai.
Insurers have to give their views on Irdai’s latest draft by June 4.
