Institutional insurance players such as ICICI and HDFC are taboo for foreign banks. Even though these banks are eyeing extending their global relationships with international insurance companies on the Indian turf, they are wary to tie up with institutional insurance companies as their corporate agents.
They feel they would end up building the institutional players' brands and killing their own brands if they start hawking the products of these institutional risk firms.
The conflict of interest arises out of the fact that HDFC Standard Life and ICICI Prudential Life have their own banking arms. By virtue of such an alliance, foreign banks acting as a corporate agent to the insurance company would end up opening its cards to the competing private banks (HDFC Bank and ICICI Bank).
This will not affect SBI Life Insurance, since through its foreign partner, Cardif, it will be able to capitalise on BNP Paribas' customer base in the country.
Foreign banks are not keen to endorse the brand name of an institutional player. Given the cross-selling of products that will take place through banks tying up as corporate agents, "our tying up with insurance outfits like ICICI Prudential Life or HDFC Standard Life, would give the competing banking arms access to our customer base", pointed out a foreign bank official.
Further, such institutions could also adopt the jointly-developed products of the bancassurance tie-up, said the official. Despite assurances given by institutional insurance companies of adopting a Chinese wall between insurance and banking operations, foreign banks are not convinced and prefer to maintain arms' length.
Foreign insurance companies have much to gain from foreign banks. They are more comfortable with such banking outfits, as "they understand our operations and our customer base is primarily made up of higher net worth individuals on account of the earlier minimum deposit base", said a spokesperson from Standard Chartered Bank.
Even before the Insurance Regulatory and Development Authority (Irda) finalises the corporate agency regulations, private insurance players are on the prowl, striking strategic alliances with banks for the distribution of their products. Citibank NA has tied up with Birla Sun Life Insurance on the life side and Royal & SunAlliance on the non-life side.
Similarly, Max New York Life has tied up with HSBC. Institutional insurance outfits have not been able to clinch any such alliances with foreign banks as yet. HDFC Standard Life has to date tied up with Indian Bank as well as two non-banking finance companies, the Cholamandam group and Peerless, among others.
Prudential Plc has a global relationship with Standard Chartered Bank and Citibank. However, Citi has already tied up Birla Sun Life Insurance.
As per Irda regulations, a corporate agent cannot tie up with more than one player on either the life or non-life side. As such, Prudential's global relationship with Citibank will not extend to India unless the regulations for corporate agency change or Citibank chooses to become a broker, said company officials.
