Banks must sell more insurance products, insists IRDA
18 January 2014
The Insurance Regulatory & Development Authority said on Friday that it wants banks to ''act as brokers'' and sell products of a range of insurance companies rather just a few; and not just to the bank's clients.
At a meeting with life insurance companies in Hyderabad on Thursday, the regulatory authority supported the finance ministry's decision to open up the bank network for selling a wider range of insurance products.
A senior IRDA official said it may go so far as to make the broking model for banks compulsory if significant traction is not achieved in insurance penetration.
''IRDA is already in touch with the finance ministry and the Reserve Bank of India in this regard. A decision on making the 'broker' model compulsory for banks rather than agent model if is on the cards if [agent model] does not see traction in the next two to three months,'' the official said at the two-day stakeholder meeting.
Banks currently sell insurance products only to their customers. They should act as brokers representing multiple insurance companies giving the best option to the customer rather than trying to sell a particular company's products, IRDA chairman T S Vijayan had recently said.
As an insurance broker, a bank is liable to consumers with respect to an insurance policy, unlike a corporate agent. The liability could be higher if a bank sells the products of multiple insurers.
In December, the finance ministry in a circular asked public sector banks to take up insurance broking by January-end in view of the meagre insurance penetration in the country, especially in rural areas.