Bancassurance can involve a single relationship with an insurance company or with multiple insurers across states.
IRDA yesterday issued draft regulations on bancassurance tie-ups. According to the draft regulations, banks can either act as a broker or as an agent.
“The channel of distribution for bancassurance may either be through the agency channel or the broking channel. The conduct of bancassurance through a broking channel will be governed by the IRDA (Insurance Broker) Regulations, 2002 and applicant desirous of conducting such business may apply as per the procedure laid down in the said regulations. The conduct of business through the agency channel will be as per the regulations herein contained,” said the IRDA exposure draft. A bank can have a tie up with a maximum of four insurers from one sector.
According to the draft, a bank can either continue to have a single relationship with an insurance company or with multiple insurers across states. The guidelines state, “a bancassurance agent desirous of tie up with more than one class of insurer shall be allowed to do so under these regulations to a maximum of 20 states/Union territories and a minimum of 10 states/Union territories.”
The draft has allowed insurers to pay banks other administrative and service costs. According to the draft, a bancassurance agent can get commissions only up to 85% of the commissions of the limit specified in Section 40A of the Insurance Act, 1938.