In view of the tepid response by banks to act as brokers for selling products of multiple insurers, Insurance regulator, Insurance Regulatory and Development Authority (IRDA), would be renewing the corporate agency licence of banks, which would enable them to continue to exclusively sell products of one insurance company.
Last year, IRDA had released final guidelines on bancassurance which allowed banks to sell insurance products of many companies. However, the new model failed to gain the required response as many banks have floated their own insurance subsidiaries or have tied up with one insurer or other exclusively.
At present, banks have a corporate agency arrangement with insurance companies to sell insurance products. Under this arrangement, banks are allowed to sell products exclusively of one life insurer, one non-life insurer and a standalone health insurer.
Nevertheless, the sectoral regulator still believes bank’s insurance broking model would gain momentum going further and is currently working with the Reserve Bank of India to craft guidelines on which could be in the best interest of bother stakeholders and policyholders.
Further, IRDA also emphasized upon the need for correct pricing of insurance products, and the role that actuaries play in determining prices. The regulator also raised concern on the persistence levels of life insurance industry, underscoring that product design was very crucial for high persistence and also stressed on lowering expense ratio.