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The expert committee, which was set up to decide on banks becoming insurance brokers, will submit its report to the finance ministry in early March 2014.
Financial services secretary Rajiv Takru said that the pros and cons of banks tying-up with multiple insurance companies as brokers was discussed at a meeting here on Tuesday.
According to Indian Banks' Association (IBA) officials, the finance ministry has asked the sector to evolve the insurance broking model and lay down the transition path into the model. The sector has been asked to ensure that customer centricity is maintained and mis-selling is avoided.
At present, banks follow the corporate agency model where one bank is allowed to tie up with one life, one non-life and one standalone health insurance company to sell products.
In December 2013, the finance ministry had sent a circular to the heads of the public sector banks to become insurance brokers, in order to boost penetration of products through their branch networks. Following this, the banks expressed their apprehension about the model, because several of these banks were promoters of insurance companies and shareholders would be disappointed if they sold rival insurers' products.
Later, the banks set up an expert group to study the insurance broking model to be followed. This group has representatives from the Reserve Bank of India (RBI), Insurance Regulatory and Development Authority (Irda), senior bankers and insurance executives.
A senior insurance executive who attended the meeting said it is almost clear that banks would have to eventually become insurance brokers.
"The only relaxation that could be given is the time that will be given to them in evolving their mode," the executive added.
Both RBI and Irda have brought out guidelines for banks to become brokers. Irda chairman T S Vijayan has also said it would favour banks becoming brokers and are engaged in a dialogue with banks to ensure a smooth transition. "We do not want to make any abrupt change and would not stop corporate agency renewals that are on the anvil. Our motive is to ensure we do what is best for the policyholder," he had said.
