The Indian Banks Association (IBA) feels that it is up to the banks concernd to decide on insurance distribution and IBA cannot take a single view in this matter. The finance ministry has asked banks to become insurance brokers thereby implementing the budget announcement of banks becoming insurance brokers within the framework of guidelines issued by IRDA and RBI. The ministry has also said the public sector banks may join the insurance broking business in order to increase insurance penetration and avoid mis-selling of insurance products.
IBA at a recent meeting of its managing committee discussesd the issue and it felt that the finance ministry’s letter leaves it to banks to choose to become brokers and sell policies of multiple insurers or continue as corporate agents for one insurance company.
IBA’s CEO M V Tanksale said since every bank is in a different position with respect to insurance distribution, IBA felt it cannot take a single view on this and it is the individual banks which will have to take a view on this at their board level.
Tanksale also said that IBA has sought clarification on the ceiling of 25% on the extent of business that a bank can do with one insurance company and it wanted to know whether the current cap of 50% on the extent of business a broker can generate from a single customer will continue.
Banks, following exclusive distribution agreements they have concluded with their joint venture partners, have received upfront payments running into hundreds of crores. Many of the banks have insurance companies through joint ventures. These include SBI Life, Star Union Dai-ichi Life Insurance by Bank of India and Union Bank, IndiaFirst Life Insurance by Bank of Baroda and Andhra Bank, PNB Metlife by Punjab National Bankand Canara HSBC OBC Life Insurance by Canara and Oriental Bank of Commerce.