 "PSBs' insurance foray left to each bank")
Public sector banks (PSBs) will have to take a call individually on the impact of the finance ministry’s directive to become insurance brokers and plead their case with the government.
Indian Banks’ Association (IBA) — the banking industry lobby group — in an internal meeting on Friday decided that each PSB’s board will discuss the finance ministry circular on becoming such brokers. After this, their (the banks’) boards will prepare an analysis of implementation and then present their case.
“Given the differences in the structure and the size of the banks, it is difficult to take a collective view on this issue. Hence, the respective bank boards will meet and take a call,” said a senior executive of a public sector bank who is privy to the discussions at the meeting. The finance ministry, in a circular on December 20 to the chief executives of all PSBs, had said such banks should leverage their branch network for insurance penetration and hence become brokers. The circular also says the model of corporate agency be dispensed with and each bank needs to train and orient its staff to conform to the finance minister’s Budget announcement.
Both Insurance Regulatory and Development Authority and the Reserve Bank of India (RBI) have already brought out guidelines for banks to become brokers.
In the IBA meeting, bankers also expressed concerns about shifting from a bancassurance model to an insurance broking model. “Shifting overnight fr-om a corporate agency (bancas-surance) model to an insurance broking model will be very difficult,” said a PSB official.
Currently, bancassurance follows the corporate agency model where a bank can only tie up with one life, one non-life and one health insurer to sell their insurance products. Hence, non-bank promoted insurance companies and late entrants to the insurance industry do not have any bank partner to sell their policies.
“You are requested to implement the spirit of the Budget announcement within the framework of guidelines by Irda and RBI in this regard under intimation to this department (department of financial services) by January 15, 2014,” said the circular by the department of financial services.
The chairman & managing directors of public sector banks have been asked to report compliance and progress of the circular's contents to Financial Services Secretary Rajiv Takru on January 31.
Finance Minister P Chidambaram, in his Budget speech, had permitted banks to become insurance brokers. He had said that this will help boost insurance penetration and reduce mis-selling of products.
Indian Banks’ Association (IBA) — the banking industry lobby group — in an internal meeting on Friday decided that each PSB’s board will discuss the finance ministry circular on becoming such brokers. After this, their (the banks’) boards will prepare an analysis of implementation and then present their case.
“Given the differences in the structure and the size of the banks, it is difficult to take a collective view on this issue. Hence, the respective bank boards will meet and take a call,” said a senior executive of a public sector bank who is privy to the discussions at the meeting. The finance ministry, in a circular on December 20 to the chief executives of all PSBs, had said such banks should leverage their branch network for insurance penetration and hence become brokers. The circular also says the model of corporate agency be dispensed with and each bank needs to train and orient its staff to conform to the finance minister’s Budget announcement.
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Bankers are hoping that there is some flexibility provided by the finance ministry in the implementation of the contents of the circular.
Both Insurance Regulatory and Development Authority and the Reserve Bank of India (RBI) have already brought out guidelines for banks to become brokers.
In the IBA meeting, bankers also expressed concerns about shifting from a bancassurance model to an insurance broking model. “Shifting overnight fr-om a corporate agency (bancas-surance) model to an insurance broking model will be very difficult,” said a PSB official.
Currently, bancassurance follows the corporate agency model where a bank can only tie up with one life, one non-life and one health insurer to sell their insurance products. Hence, non-bank promoted insurance companies and late entrants to the insurance industry do not have any bank partner to sell their policies.
“You are requested to implement the spirit of the Budget announcement within the framework of guidelines by Irda and RBI in this regard under intimation to this department (department of financial services) by January 15, 2014,” said the circular by the department of financial services.
The chairman & managing directors of public sector banks have been asked to report compliance and progress of the circular's contents to Financial Services Secretary Rajiv Takru on January 31.
Finance Minister P Chidambaram, in his Budget speech, had permitted banks to become insurance brokers. He had said that this will help boost insurance penetration and reduce mis-selling of products.