Insurance Regulatory and Development Authority (Irda) will make available multiple structure options to the banks to tie-up with insurance companies. An official close to this development said that the banks would have options to tie-up with insurers as a corporate agent, as a broker or in a particular zone.
Under current rules, banks cannot tie up with more than one life and non life insurer each to sell their policies. Insurers have demanded an open architecture for bancassurance, so that companies who do not have a bank partner can tie-up with them to distribute their products. As per the premium collection data of Indian insurers, with a bank partner, for 2012-13 financial year, nearly 70-75 per cent premium was generated from partners.
The new guidelines, which are expected to be released in the next few days are expected to allow banks to choose one of the multiple channel structures to sell insurance policies of companies. However, officials said that the broker route was the least preferred mode of bancassurance and even if offered, very few banks would take up this option.
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In his budget speech, finance minister P Chidambaram had said that banks would be allowed to act as brokers to sell insurance. However, Reserve Bank of India (RBI) has expressed some apprehensions about this model and said that it could lead to 'reputational risks' for banks.
The Irda draft on bancassurance released in second half of last year had proposed a zonal system of bancassurance. Here, the insurance regulator had said that banks would be divided into three different zones and could tie-up with two to three companies in each zone. This, according to newer insurers, will enable them to utilise the bank channel in smaller locations.
"For example, we are not very strong in areas in Northeast India. However, since several large public sector banks have a good branch presence in those areas, it would be advantageous to us," said a senior official of a private general insurance firm.