 "The idea of banks becoming brokers will gain acceptance: Vijayan")
The idea of banks becoming insurance brokers will gain acceptance, according to Insurance Regulatory and Development Authority (Irda) chairman T S Vijayan.
Speaking on the sidelines of an insurance summit organised by the Confederation Indian Industry, Vijayan said banks don’t canvass for new customers to sell these products, but utilise their existing customer networks for the same. “If you are a representative of the customer, they should be given the best choice of products.”
In its regulations on licensing banks as insurance brokers, Irda said that each applicant (scheduled bank) should have obtained prior approval of Reserve Bank of India (RBI) before applying for a licence to act as an insurance broker. The licence, once granted, will be valid for three years after which it will have to be renewed.
Although RBI’s nod is required for banks to become brokers, Irda has maintained that in case of any dispute arising out of insurance transactions, the jurisdiction of Irda shall prevail. It added that the laws applicable to insurance contracts will be enforced and information in this regard furnished to RBI.
Vijayan explained that till now, banks have been selling products of one company as corporate agents. He added that while an agent represents the company and gets customers from market, a broker represents the customer. “But, this idea will get acceptance widely, among both companies and banks,” he opined.
According to Vijayan, misselling largely refers to a situation when there is a mismatch between expectation and experience. However, he added that Irda was taking efforts such as simplification of policy documents and benefit illustrations and offering positive returns to customers.
Vijayan admitted that companies were posting losses even after being in operation for eight to nine years and that areas such as life insurance need capital. He also pointed out that a mere hike in foreign direct investment (FDI) cap would not be sufficient.
“Increase in capital (FDI) is not equal to increase in growth and stability. Health of the company is also a concern. Not the size, but it’s the strength of the company that’s important. At the same time, ‘more than normal’ growth situations are also a cause of concern,” he pointed out.
Vijayan also highlighted the need for add-on services by insurers in government schemes such as Rashtriya Swasthya Bima Yojana and having a separate category of standardised insurance products.
Speaking on the sidelines of an insurance summit organised by the Confederation Indian Industry, Vijayan said banks don’t canvass for new customers to sell these products, but utilise their existing customer networks for the same. “If you are a representative of the customer, they should be given the best choice of products.”
In its regulations on licensing banks as insurance brokers, Irda said that each applicant (scheduled bank) should have obtained prior approval of Reserve Bank of India (RBI) before applying for a licence to act as an insurance broker. The licence, once granted, will be valid for three years after which it will have to be renewed.
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While industry players are not confident of getting RBI’s approval, Vijayan said this is a natural corollary because RBI is the regulator.
Although RBI’s nod is required for banks to become brokers, Irda has maintained that in case of any dispute arising out of insurance transactions, the jurisdiction of Irda shall prevail. It added that the laws applicable to insurance contracts will be enforced and information in this regard furnished to RBI.
Vijayan explained that till now, banks have been selling products of one company as corporate agents. He added that while an agent represents the company and gets customers from market, a broker represents the customer. “But, this idea will get acceptance widely, among both companies and banks,” he opined.
According to Vijayan, misselling largely refers to a situation when there is a mismatch between expectation and experience. However, he added that Irda was taking efforts such as simplification of policy documents and benefit illustrations and offering positive returns to customers.
Vijayan admitted that companies were posting losses even after being in operation for eight to nine years and that areas such as life insurance need capital. He also pointed out that a mere hike in foreign direct investment (FDI) cap would not be sufficient.
“Increase in capital (FDI) is not equal to increase in growth and stability. Health of the company is also a concern. Not the size, but it’s the strength of the company that’s important. At the same time, ‘more than normal’ growth situations are also a cause of concern,” he pointed out.
Vijayan also highlighted the need for add-on services by insurers in government schemes such as Rashtriya Swasthya Bima Yojana and having a separate category of standardised insurance products.