Open access to all insurance policies in large banks is still sometime away
It is estimated that almost 30-40 percent of the policies are sold through the bancassurance channel in India.
The vision was simple. Walk in to any bank branch and get access to multiple insurance policies at the same time. This way, not only will banks not force their group company’s policies but access to insurance was to be made easier as well. However, almost two years after Insurance Regulatory and Development Authority of India (IRDAI) allowed banks to sell products of multiple insurers, large banks have chosen to stay away.
According to IRDAI norms, a bank can sell products of three life, three non-life and three standalone health insurers each. While initially the plan was to make it mandatory for all banks to open up their branches to multiple insurers, following stiff resistance from public sector banks, this proposal was withdrawn.
Previously, the bancassurance model meant that banks as corporate agents could only sell products of one life, one non-life and one standalone health insurer.
Among the private sector players, IndusInd Bank was the first player to enter into an agreement with Reliance General Insurance to sell the latter’s products across their branches. Later, banks like Axis Bank and Bank of Baroda also came forward to open up their network to other insurers.
Here, Bank of Baroda has been among the most active among the public sector banks with respect to the tie-ups.
It is estimated that almost 30-40 percent of the policies are sold through the bancassurance channel in India. The rest is sold by insurance agents and less than 5 percent is through the direct channel.
A regulatory official said that they will seek a formal path to opening up from the bank boards from the next financial year onwards. This would force banks to disclose the timeline they have in mind to open up their branches.
“Some banks have expressed their inability to open up since they are promoters of insurance companies. They may be given some more time,” the official added.
Apart from Axis Bank, other private banks have also entered into multiple tie-ups. In May 2016, IndusInd Bank announced that it has entered into a tie-up with Reliance General Insurance to distribute its insurance products across all its bank branches. This was one of the first private sector bank agreements signed after the new corporate agents norms came into being.
Data shows that the bancassurance market size is around Rs 12,000 and is driven largely by unit-linked insurance policy sale. There is still a large scope since public sector banks with more than 400 million accounts have an insurance penetration of just over 2 percent. It is estimated that increase of penetration in the public sector banks alone to 15 percent, can add 50-70 million customers and generate additional Rs 60,000 crore in life insurance premium in the next five years.Double regulation has also lead to banks shying away from opening up their branches. According to new norms by the banking regulator, banks will be liable for penalty for misselling of insurance by the banking ombudsman too, apart from IRDAI.