Contrary to its earlier proposal on corporate agents in which it proposed to allow banks, NBFCs (corporate agents) to sell insurance policies of at least three life, three general and three standalone health insurers, IRDAI has now proposed to make it voluntary for banks to form such tie ups. That means, banks can take a decision at their discretion whether they want multiple tie-up model or continue to work under bancassurance model.
The regulator has clarified that the changes have been proposed in the draft regulation on the basis of feedback received by market participants. In the draft circular, it said, “The corporate agents instead of having tie ups with a minimum of two insurers may now choose from one to a maximum of three insurers in any particular line of insurance business.”
Few months back, IRDAI had proposed that corporate agents can sell multiple insurance products of life, non-life and health insurance companies in order to provide a wider choice to investors.
Meanwhile, the regulator has also removed the cap on insurance business which a corporate agent had to maintain with an insurance company. The regulator had proposed that the premium collection from any single insurer should not exceed 90% of total collection in the first year, 75% and 60% in the second and third year respectively. Such a limit was proposed to cap at 50% of total premium in the subsequent years.
Typically, many banks are corporate agents of their promoter group companies. Last year, IRDAI and RBI had allowed banks (corporate agents) to act as insurance brokers in order to increase insurance penetration in small cities and rural areas. However, it didn’t take off as expected as many banks are reportedly unwilling to change their model due to stringent compliance.