IRDA to come up with 'Bancassurance' guidelines in Feb

Insurance regulator IRDA is likely to come up with 'Bancassurance' guidelines by the first week of February, Chairman J Hari Narayan said today.

"The final guidelines are expected by the first week of February," he told reporters on the sidelines of an event of Insurance Brokers Association of India here. When asked about the concerns of the Reserve Bank with regard to bancassurance model, he said they are looking into all representations.

"We are considering all the representations. We are convening a meeting later this month to consider the guidelines," he said. Earlier, the Reserve Bank had said its Financial Stability Report that the draft guidelines released by IRDA may expose banks to reputational risks.

In bancassurance model, banks sell products of insurance companies and the present law allows a bank to sell insurance product of one company as an agent. However, some banks want to convert into a "broker", beyond the present role as "agents", which will allow them to hawk the offerings of more than one insurer.

So far, Irda has sounded positive on the demand, but RBI wants banks to restrict to one single company and continue being an "agent". The insurance watchdog also said it is not in favour of dismantling of declined motor pool as suggested by the general insurers and want this system to continue for sometime before taking a call.

"We have concerns regarding dismantling of declined motor pool. When it was completely dismantled, we found that hardly any sales of third party was found by the private insurers and all of it was made available by the public insurer. So, I think, we should continue with it for one or two years," Narayan said.

Earlier, general insurers have raised the issue of dismantling the 'declined motor pool' system in their meeting with Finance Minister. The regulator also said that the motor pool premiums were likely to go up by March 31, 2013.

Narayan also said that the regulator was likely to come up with investment guidelines by the end of this month. Referring to appointment of a fifth member in IRDA by the government to look after distribution, the chief of IRDA said that it would have been better to have a member for consumer rights.