IRDA gives banks options in bancassurance

 The Insurance Regulatory and Development Authority (IRDA) has come put with a revised set of draft regulations on bancassurance tie-ups under which banks can sell insurance products either as a corporate agent or a broker for insurance companies.

To start with, bancassurance is all about an arrangement through which banks sells insurance products.

The draft norms issued by insurance regulator IRDA during this week envisage option for banks as corporate agents who can sell insurance products for only one insurer while a broker can sell multiple companies' products. Those opting to be a broker will have to first withdraw from their existing bancassurance partnership.

According to the draft norms, “The channel of distribution for bancassurance may either go through the agency channel or the broking channel. The conduct of bancassurance through a broking channel will be governed by the Irda (Insurance Broker) Regulations, 2002 and applicant desirous of conducting such business may apply as per the procedure laid down in the said regulations.

” Last week, the finance ministry allowed banks to sell insurance products offered by more than one company through a broking agency.

However, the “controversial” clause where banks are required to compulsorily tie up with insurance companies other than those promoted by them, has been retained.

The norms also provide for changes in zonal tie ups, wherein the regulator has divided 40 locations across the country into three separate zones, A, B and C. Zone A comprises metro and Tier I cities, Zone B and C include Tier II cities, north-eastern states and Union territories.

Under the proposed norms, a bank can tie up with only one life, non-life and health insurance company in minimum 10 locations and maximum 20 locations. This means  banks with their own insurance entities will need to tie up with other insurance companies.

The commission to be paid to bancassurance agent will not exceed 85% of the limit specified in the insurance Act 1938.

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