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In a boost to the sagging insurance sector, Finance Minister P Chidambaram in his Budget also announced that insurance companies will be allowed to open branches in Tier II cities and below without prior approval of Irda.
He further announced all towns with a population of 10,000 or more will have an office of LIC and at least one public sector general insurance company by March, 2014.
"Banks will be permitted to act as insurance brokers so that the entire network of bank branches will be utilised to increase penetration. (and) Banking correspondents will be allowed to sell micro-insurance products," Chidambaram said.
The Minister said that KYC (Know Your Customer) of banks will be sufficient to acquire insurance policies.
India is one of most under-insured countries in the world with the penetration of less than 4% of the GDP.
Group insurance products, he said, will also be offered to homogeneous groups such as SHGs, domestic workers associations, anganwadi workers and teachers, besides others.
Referring to about 10 lakh motor third party claims that are pending before Tribunals/Courts, Chidambaram said public sector general insurance companies "will organise adalats" to settle the claims and give relief to the affected parties.
Commenting on the announcements, Tata AIG General Insurance CFO said that insurance broking is a specialised business and may require banks to develop additional skills.
"This move by the government will allow insurers to take advantage of the banks' distribution network," Mukherjee said.
Max Life Insurance MD and CEO Rajesh Sud the proposal to allow insurance and pension companies to directly trade in debt segment will allow institutional participation in the exchange traded bond market.
