Banks can now sell insurance policies of multiple companies after the Insurance Regulatory Authority of India (IRDA) allowed them to become licensed insurance brokers.
Earlier, banks were allowed to sell products of only one life and one general insurance company. This proved to be restrictive for new insurance companies, who found it tough to find bancassurance partners.
"The contribution of the bancassurance channel is around 30% of the total premium for the life insurance business. Insurers who have not been part of the bancassurance relationship due to single tieup allowed as a corporate agent will now have the option of selling policies through this channel," says Monish Shah, senior director, Deloitte in India.
According to insurance experts, allowing banks to be insurance broker not only means more options for customers but also better products offerings. Banks, at present, sell bundled insurance products, which customers may not even require.
"Bancassurance allows insurance companies access to the masses through 600-crore-plus bank accounts in the country. We are in talks with several banks across the country and are looking to close some formal agreements soon," says Antony Jacob, Chief Executive Officer, Apollo Munich Health Insurance, a standalone health insurer.
As insurance brokers, banks will now be expected to develop an advisory platform and move away from the existing transactional platform. This also means banks will now have to han- dle customer complaints directly, making them more accountable for mis-selling.
Until now, brokers had to be dedicated intermediaries for insurance distribution. But the new regulations allow this business to be carried departmentally within a bank, with the chief executive not required to be an expert in insurance. However, banks will not have to appoint an executive solely in charge of the broking unit.