 "Public sector banks open up to multiple insurers")
From April 1, open architecture for bancassurance came into existence. In less than two months, a handful of public sector banks (PSBs) — Andhra Bank, Bank of India (BoI), Bank of Maharashtra (BoM), Bank of Baroda (BoB) and Canara Bank — have come forward to tie up with multiple insurers.
All these banks had brought out a request for proposal (RFP) to tie up with more than one insurance company. For instance, BoM in its RFP has said it is exploring the possibility of entering into tie-ups with two more general insurance companies as their corporate agents. It already has a partnership with United India Insurance to sell their products. Similarly, it is exploring the possibility of tie-ups with standalone health insurance companies, since it has no such partnerships at present.
The Insurance Regulatory and Development Authority of India (Irdai) has opened up the corporate agency channel, which includes banks. It has opened a channel wherein banks (and other corporate agents) can engage with up to three life, three non-life and three standalone health insurers (earlier, it was only one in each of the three segments). Hence, a bank can sign up with a maximum of nine insurers to sell its products.
While some banks have expressed interest in tying up with multiple insurers in each category, some want to keep it restricted. Canara Bank, for instance, intends to enter into a corporate agency agreement with one more general insurance company (it already has a tie-up with United India), to tap into the vast potential available for general insurance business at all its branches across the country and help customers cover their assets against various kinds of risks. Canara is one of the promoters of Canara HSBC OBC Life Insurance, a 100 per cent bancassurance-led insurer.
Some have entered into tie-ups. Star Health and Allied Insurance and BoB entered into a corporate agency agreement to market the former's products across the latter's branches. P S Jayakumar, managing director of BoB, said they had more than 2,000 trained and certified persons who'd be involved in the marketing. Insurance companies are also of the view that getting a bank on board will help them in increasing their premium collection. V Jagannathan, chairman of Star Health, said this new association with BoB would help them get Rs 3,000 crore worth of premium, higher than this year's target of Rs 2,750 crore.
Further, Mayank K Mehta, executive director, BoB, said they were taking advantage of the corporate agency model and entering into multiple contracts with life, general and standalone health insurance companies. The arrangements should help in increasing of insurance penetration, especially in semi-urban and rural areas. Several of these public sector insurers are already either promoters or partners with private insurance companies. Hence, some of them are restricting themselves to categories where they are not yet present. A BoI executive said they were going for more than one tie-up for the general insurance space, to tap the wide business scope and earn fee income. At present, it has an arrangement with public sector National Insurance in the general segment. The bank is looking to select one more state-owned general insurer and one private sector player in general insurance.
While BoI would certainly like to use its 5,000-plus branch network, the scaling up will be a gradual process due to limitations in trained personnel, the executive said. In the long term, the Mumbai-based lender would go for more than one alliance in the life insurance space, too. But, for now, it plans to stick with Star Union Dai-ichi Life Insurance, where it is one of the promoters. Similarly, they plan to tie-up with one standalone health insurer, since they would sell health policies of life and general insurance companies, too, as partners.
Andhra Bank is looking at the possibility of entering into a distribution partnership with one more general insurance company (apart from United India) by way of the corporate agency arrangement.
It is looking for similar tie-ups with standalone health insurance companies, too.
Since the aim of the regulator was to offer more choice to customers and also enable non-bank promoted insurers to have access to banks, some of these banks have put that in their eligibility criteria. For instance, Canara and Andhra Bank have said to be eligible for a tie-up, the bidder (insurer) should be a non-bank promoted company. Solvency ratio is a crucial factor, mentioned as one of the eligibility criteria by all banks.
Opening up to more than one insurer is not restricted to PSBs. Some private banks are also opening up to more than one. IndusInd Bank recently signed a corporate agency agreement with Reliance General Insurance, the aim being to distribute multiple options of general insurance products to its customers. With this partnership, Reliance General has extended its distribution channels and will distribute its products across all the branches of IndusInd.
Rakesh Jain, chief executive at Reliance General, said the bancassurance channel had the potential to reach out to the last mile and serve untapped markets, promoting insurance penetration. "With the alignments of our brands, people and processes, we hope to create huge value for all our customers and stakeholders on a long-term basis," he added.
NEW TIE-UPS
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Andhra Bank, Bank of India (BoI), Bank of Maharashtra (BoM), Bank of Baroda (BoB) and Canara Bank have brought out a request for a proposal to tie up with more than one insurance firm
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Opening up to more than one insurer is not restricted to PSBs. Some private banks are also opening up to more than one
