Insurance regulator Insurance Regulatory and Development Authority of India (IRDAI) may bring regulations to curb over dependence on bancassurance at parent bank, IRDAI sources told Moneycontrol.
Insurance companies will have to make tie-up with more banks for reducing dependency on the parent bank, the sources said about the likely norms that could come into effect.
IRDAI will bring new regulations on bancassurance and it will follow stakeholder consultations and exposure drafts, the sources added.
The insurance regulator has been raising concerns over parent banks selling 90% of subsidiary insurers.
The regulator is likely to encourage diversification across multiple channels to ensure balanced growth, said sources, adding that IRDAI thinks heavy reliance on a single channel is unsustainable.
IRDAI closely monitors the concentration of business in specific distribution channels, they said.
Concerns over mis-selling or forced selling of insurance products has also in the recent past been raised the IRDAI chairman as well as Finance Minister Sitharaman. The regulator's concerns is any potential weakness relating to a bank could as a result impacting the insurance business as well, leading to policyholders suffering.
"I wish to say this for the due consideration of the bank boards, sale of insurance by banks has raised concerns of instances of mis-selling and I would say this has contributed indirectly to cost of borrowing for the customers. So, banks will have to look at this , look at their core banking activities and not burden customers with insurances they don’t require," FM Sitharaman had said at the SBI Conclave in Mumbai on November 18.
Earlier last month, CNBC TV18 had reported IRDAI may consider capping parent bank's share to insurers' total bancassurance business to up to 50% only. The news report was refuted by HDFC Life, calling it 'inaccurate', and based on 'rumours and speculation'. "As an organisation, we believe that regulatory changes of such significance are typically preceded by detailed industry consultations," HDFC Life added said in its official statement dismissing the news report. The company has a well-diversified distribution network that enables to deepen insurance penetration, it added.
SBI Life said in a stock exchange filing, "At the outset, we would like to mention that IRDAI adopts a consultative process and seek feedback from all stakeholders which then is used to prepare the regulatory guidelines/articulate any concerns that the IRDAI may have with the industry.
In H1FY25, SBI Life got 60% of business from bancassurance channel, largely from State Bank of India. In H1FY25, ICICI Prudential got 29% of business from bancassurance while LIC got 4% business. Max Life received 52% of business from bancassurance in H1FY25, mostly from Axis Bank, and HDFC Life received 65% of business from bancassurance in the first half of the fiscal.
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