New bank-insurer tie-ups delayed

M SaraswathyMoneycontrolDistribution remains a key challenge for insurers as leading banks are yet to warm up to the idea of selling more than one insurer’s product. The country’s largest lender, State Bank of India (SBI) has said that it has not yet taken a decision on selling multiple insurers’ products and will first try it as a pilot with wealth management customers.Insurance Regulatory and Development Authority of India (IRDAI) had earlier said that banks could tie-up with up to three life, three non-life and three standalone health insurers. While it was not made mandatory for the banks, the regulator had said that the corporate agents (including banks) must have board approved policies that should show a time-line for opening up. SBI chairman Arundhati Bhattacharya said that training the staff is a crucial factor and that they have not yet taken a decision on when to open up.However, while there is some reluctance to sign up agreement to sell insurance products of private insurers, banks have shown interest to tie-up with public sector insurers like Life Insurance Corporation of India (LIC). A senior insurance official said that considering the base volumes of LIC which were high and the brand value, tying up with them made business sense.In 2016, Axis Bank had tied up with LIC to sell their policies. The bank is already a corporate agent of Max Life Insurance.When IRDAI had announced opening up of the bancassurance network where earlier banks could sell policies of one life, one non-life and one standalone health insurer, IndusInd Bank was among the first banks to tie-up. It had signed a Corporate Agency agreement with Reliance General Insurance, with the objective to distribute multiple options of general insurance products to its customers.Due to the nature of the business and the difficulty to source business, many insurers had exclusive agreements with their bank partners which meant that these banks were not allowed to tie-up with other insurers. This is also because some insurers only have banks as primary distributors.For instance, Canara HSBC OBC Life Insurance is a 100 percent bancassurance insurance company and does not have any agents to sell policies.Bankers said that the primary issue is that personnel will have to be trained to sell newer policies. “Currently, they only sell one insurance company’s products. If they are required to sell multiple insurers’ products, that additional amount of training will have to be put in. At present, insurance sales is still a non-core activity for us,” a senior public sector banking executive said.Further, another issue is that IRDAI now puts the onus of the policy sales on the bank. Hence, if any complaint of mis-selling comes up, the bank will be held responsible. Prior to the changes in norms, the insurer was responsible for the sale.Regulatory officials said that the initial plan was to make banks sell products of multiple insurers. However, after stiff resistance from large public sector banks, this plan was dropped. But the regulator plans to nudge these banks to open up atleast in the next two to three years by giving a clear roadmap to the board on the path.