 "IRDAI to seek concrete plan from banks on opening up branch network for more insurers")
From the next financial year onwards, bank boards will be required to give a clear plan about how and by when would they open up their branch network to more than one insurer in each category — life, non-life and standalone health. This is because even after the Insurance Regulatory and Development Authority of India (Irdai) opened up the bancassurance network to more insurers, no bank has approached the regulator for additional tie-ups.
Once banks start submitting their business proposals with bancassurance plans, Irdai might insist on them tying up with more than one insurer.
According to the new rules for licensing of corporates agents announced in September, banks can tie-up with up to three life, non-life and standalone insurers each, instead of only one insurance company earlier. However, this has not been made mandatory.
However, bank boards have been asked to disclose the approach in having single or multiple tie-ups, the partners in the tie-ups, the business mix, the type of products sold, grievance redressal mechanism and reporting requirements. Further, the board-approved policy has to address the manner of adopting the philosophy of open architecture.
Insurance company executives said this move by Irdai is to ensure that no bank network in the future is available exclusively to only insurer. “If bank boards are asked to disclose their strategy of opening up, the bank branches with low penetration of insurance will be able to sell more number of policies and offer choice to customers,” said a senior private life insurance chief executive.
The regulator did away with an earlier proposal on capping insurance business from one insurer by a bank. In the first draft on licensing of corporate agents, banks were asked to cap business from one insurer to 90 per cent in the first year, and to 50 per cent after four years or more.
Prior to this, banks are allowed to tie up as a corporate agent with one life, one non-life and one standalone health insurer. This meant those insurers without any bank partners had no chance of selling insurance via this channel since a majority of this network had been utilised by bank-promoted insurers or older insurers who had already forged agreements with banks to sell insurance.
Large banks that promote insurance companies had approached the finance ministry with concerns that mandatory caps restricting business from one insurer would have a significant impact on their valuations. They requested the regulator to reconsider the cap. Otherwise, they believed, this would impact the flow of foreign direct investment to their insurers.
