Banks should be allowed to
sell insurance products of two insurers each in life and non-life categories, an
Insurance Regulatory and Development Authority (Irda) -appointed committee has recommended.
The suggestion, if implemented, would help the
insurance industry to expand its business at a time when the government is pushing for financial inclusion of people living in rural and remote areas.
"Banks shall be allowed to have tie-up with any two sets of insurers. Two in life insurance, two in non-life insurance, two in health insurance," the Irda constituted Committee on Bancassurance said in its report.
According to the existing practice, a bank is allowed to sell a product each in life insurance, general and health insurance companies.
Also, the committee has favoured the tied agency format for bancassurance. Under the tied agency model one agency enters into an agreement with a particular insurance company to sell only that company's products.
"Tied Agency model may be preserved, as legal status of the bank will be that of an agent to the insurer," it said.
The committee has also recommended increasing the tenure of the agreement between the banker and the insurer to be at least five years from the existing 1-3 years.
It said the present tenure "makes relationship between the two unstable and the exclusive distribution partnership in India loses its advantages because of the instability."
Besides, it said that each banking group should be permitted to tie up with the same set of insurers,irrespective of the number of corporate agent licences the group has.
It has also suggested that both banks and insurers need to upgrade their technology to improve the efficiency of distribution.
The insurance regulatory and development authority (Irda) had set up the Committee to study the distribution of insurance products through banks in May 2009.
The committee submitted its 12-point report to Irda in May 2011. The report has now been put put up on website for public comments.
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