 "Banks face new consumer liability issue")
Bankers had earlier said that insurance was not a core competence of their personnel and, hence, they were not in a position to take liability for policies being sold through their network
If the Reserve Bank's proposed charter of customer rights takes effect, banks will be liable for the policies they sell on behalf of insurance companies.
Under the current bancassurance norms, banks are not responsible for the policies sold as a corporate agent.
The regulator said the provider should also facilitate the redress of grievances stemming from its sale of third-party products.
"Banks have been resisting becoming a broker for a long time since their officials would be held responsible for claims, grievances related to mis-selling and others. Now that the banking regulator has talked about liability for sale of third-party products, they would have to look into servicing all needs of customers," said the chief executive of a private life insurance company.
At present, banks follow a corporate agent model, where they are allowed to tie-up with only one life, one non-life and one health insurer each. The finance ministry had in December 2013 sent a circular to the heads of public sector banks to also become insurance brokers. The idea was to boost insurance penetration by using banks' branch networks. Later, the insurance regulator also floated a proposal for all banks being mandated to become such brokers.
There had been discussion between the regulator and bankers on this issue. But several banks were against the proposal, since they would be liable for each policy sold.
Bankers had earlier said that insurance was not a core competence of their personnel and, hence, they were not in a position to take liability for policies being sold through their network. Insurance executives said companies that have a bank partner through a corporate agency or joint venture agreement would be immediately impacted if this charter was made mandatory.
"The insurance ombudsman services and Integrated Grievance Management System would have to be accessed by banks to record customer grievances and provide solutions to their concerns. They might incur additional costs, since automated systems will have to be set up to link their servers to the insurance networks," said the chief distribution officer of a large private general insurer.
Around half of insurance sales are made through the bank network. Banks sell these products through their branch network and also offer these products as combination deals with core products like savings bank accounts and loans.
If the Reserve Bank's proposed charter of customer rights takes effect, banks will be liable for the policies they sell on behalf of insurance companies.
Under the current bancassurance norms, banks are not responsible for the policies sold as a corporate agent.
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RBI's charter proposes that a customer have a right to hold the financial services provider accountable for the products offered, And, to have a clear and easy way to have any valid grievance redressed.
The regulator said the provider should also facilitate the redress of grievances stemming from its sale of third-party products.
"Banks have been resisting becoming a broker for a long time since their officials would be held responsible for claims, grievances related to mis-selling and others. Now that the banking regulator has talked about liability for sale of third-party products, they would have to look into servicing all needs of customers," said the chief executive of a private life insurance company.
At present, banks follow a corporate agent model, where they are allowed to tie-up with only one life, one non-life and one health insurer each. The finance ministry had in December 2013 sent a circular to the heads of public sector banks to also become insurance brokers. The idea was to boost insurance penetration by using banks' branch networks. Later, the insurance regulator also floated a proposal for all banks being mandated to become such brokers.
There had been discussion between the regulator and bankers on this issue. But several banks were against the proposal, since they would be liable for each policy sold.
Bankers had earlier said that insurance was not a core competence of their personnel and, hence, they were not in a position to take liability for policies being sold through their network. Insurance executives said companies that have a bank partner through a corporate agency or joint venture agreement would be immediately impacted if this charter was made mandatory.
"The insurance ombudsman services and Integrated Grievance Management System would have to be accessed by banks to record customer grievances and provide solutions to their concerns. They might incur additional costs, since automated systems will have to be set up to link their servers to the insurance networks," said the chief distribution officer of a large private general insurer.
Around half of insurance sales are made through the bank network. Banks sell these products through their branch network and also offer these products as combination deals with core products like savings bank accounts and loans.