Some insurance stocks were trading lower on November 19 after Finance Minister Nirmala Sitharaman advised banks to deter from selling insurance and instead focus on core banking.
"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," she said at the SBI Conclave in Mumbai on November 18.
Insurers get a large part of their business from banks' distribution and hence, Sitharaman's statement created uncertainty on that business.
As a results, SBI Life Insurance could be most impacted and ICICI Prudential Life and Life Insurance Corporation of India (LIC) could be least impacted.
In H1FY25, SBI Life got 60% of business from bancassurance channel (largely from State Bank of India). The company's shares on BSE closed nearly 3% lower at Rs 1,517 apiece.
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 Axis Bank) and HDFC Life received 65% of business from bancassurance in H1FY25 (largely HDFC Bank), reported CNBC-TV18 on November 19. HDFC Life shares on November 19 closed 1.67% lower at Rs 679 apiece.
Insurance Regulatory and Development Authority of India (IRDAI) Chairman Debasish Panda on November 19 said banks have to give options to the customer and no mis-selling or force selling should happen.
"It should become a distribution channel of low cost, you don't need to run behind customers, you have to give option to the customer, no mis-selling, no force selling, and also Bima Sugam will facilitate all of that," Panda said at 11th SBI Banking & Economics Conclave 2024.
He also added that banks should not forget their activities and start selling only insurance.
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