IRDA asked to hold draft law on bancassurance

India Infoline News Service | Mumbai |

Insurers have been pushing for the bancassurance norms to be revised to allow one bank to tie-up with up to five insurers as corporate agent

The Department of Financial Services (DFS) on Monday directed IRDA (Insurance Regulatory and Development Authority) to put on hold its proposed regulation on bancassurance which lays down rules for insurers to appoint banks as their corporate agents to sell policies.

The DFS has suggested to the insurance regulator to hold discussions with banks and insurers before framing the guidelines on bancassurance.

Bancassurance is the bank-insurance model. It is normally a tie-up between a bank and an insurance company whereby the insurer uses the bank sales channel to sell its insurance products.

Bancassurance allows the insurer to maintain smaller direct sales teams as their products are sold through the bank staff to bank customers.

The draft Irda (Licensing of Bancassurance Entities) Regulation 2013, which was taken up for discussion in the board meeting of IRDA on June 28, does accept an open architecture.

The draft regulation had proposed a zonal system of bancassurance. Under this, the country was to be divided in three zones which are further sub-divided into 40 regions. And a bank could tie-up with only one insurer for a minimum of 10 regions and a maximum of 20. This had meant that banks had to tie-up with a minimum of two insurers.

The DFS has questioned the rationale of insurers tying up with banks on a geographical basis and wants wider consultation with stakeholders. The Department does suggest that banks must have exclusive tie-up in one geographic region.

Insurers have been pushing for the bancassurance guidelines to be revised to allow one bank to tie-up with up to five insurers as corporate agent.

The IRDA is expected to issue the final bancassurance guidelines next month.
 

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