United India faces heat in Kerala over bank a/c shift

United India Insurance Company has temporarily withdrawn its decision to discontinue its bank accounts with public and private sector banks in Kerala.

In accordance with its new corporate policy, United India had decided to shift all bank accounts to new generation banks with effect from July 1, 2006.

But owing to resistance from various employee organisations, it has issued instructions to its branches to continue with the present system until further orders.

Earlier, United India had decided to move to three new generation banks and a foreign bank"" IndusInd Bank,

IDBI, HSBC and Standard Chartered Bank"" with effect from July 1.

Though the instructions were issued a year ago, the insurance company has not severed its ties with all the major banks owing to a host of reasons in the state.

However, it has shifted accounts of 14 branches to HDFC Bank and seven branches to Vysya Bank a year ago on a trial basis.

Interestingly, the two banks do not figure in the list of new generation banks selected for the new alliance.

The top management said new generation banks were selected because of their offer of lowest charges for various services vis-a-vis other commercial banks. As per the company's decision, IndusInd Bank would get accounts of 28 UIIC branches, HSBC 11, IDBI three and Standard Chartered one branch.

Senior officials of the company told Business Standard that accounts in other states had already been switched over to new generation banks.

It is also learnt from a source that it was a matter of time before other public sector insurance companies in Kerala would follow suit.

Meanwhile, office-bearers of various employee organisations said that the change would affect the business of United Insurance in Kerala as the company had bancassurance agreements with major banks for distribution of insurance products.

The switch-over of accounts might provoke the banks, which in turn would affect bancassurance, said a prominent leader of an officers' association.

A chunk of the total business of United India (around Rs 33 crore annually) is through bancassurance with various banks such as Federal Bank and South Indian Bank.

United India earned a total premium of Rs 194.84 crore in Kerala during 2005-06. He said that this also forced the top management of the general insurance major to roll back its decision.