IRDAI to insurers: Don't depend on banks to sell cover

The insurance regulator has warned life companies against overdependence on banks for selling policies. Banks are now the dominant mode for distributing policies of private insurers, and the share of individual agents - the core agency force of the insurance industry - has declined.

The Insurance Regulatory and Development Authority of India (IRDAI) had called a meeting of CEOs of life companies last week and bancassurance was one of the issues raised there. The fear was that if there was any eventuality which compelled the RBI to prevent banks from selling insurance, companies dependent on banks would see their sales being hit.

Insurance officials, however, say the bancassurance model is line with the developed markets, and banks are the dominant channel for distribution of life products in Europe and they are growing their share in Asia. In India, banks have three models for the life insurance business. They are either promoters like ICICI Bank, HDFC Bank and State Bank of India. They are also joint venture partners, like Oriental Bank of Commerce, Andhra Bank or Federal Bank. There are banks which only distribute insurance products without a stake in the company. The RBI has prescriptions in terms of capital adequacy and maximum non-performing assets that can be tolerated for a bank to invest in a life company. However, at present there is absolutely no restriction on banks from selling insurance.

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