RBI issues draft norms for banks' entry into insurance broking

India Infoline News Service | Mumbai |

Comments / feedback on the draft guidelines may be sent by email latest by December 31, 2013.

The Reserve Bank of India (RBI) on Friday issued a set of draft guidelines that would enable banks to act as insurance brokers.

To enable banks to leverage their branch network for increasing insurance penetration, it has been decided to permit banks to undertake insurance broking business departmentally.

“Since insurance broking is a knowledge-intensive activity requiring professional expertise, this will be permitted subject to the certain conditions,” the RBI said in a notification.

“Validity period for the approval granted for insurance broking will be three years subject to review thereafter,’’ the RBI said.

The RBI guidelines also said that the bank staff acting as brokers cannot accept cash or non-cash incentives from the bank or the insurance company.

Banks offering insurance broking services shall not enter into any arrangement for corporate agency or insurance referral business.

In order to ensure transparency, banks ought to disclose to the customers the details of remuneration received from various insurance companies for the broking business. The details of fees or brokerage received in respect of insurance broking business undertaken by them should also be disclosed.

There should be a standardized system of assessing the needs of the customer across all branches offering insurance broking services. The idea to allow allowed banks to act as brokers and sell products of more than one insurer was to increase the penetration of the sector across the country, RBI added.

“To avoid any conflict of interest, banks undertaking insurance broking business should not enter into agreements either for corporate agency or for referral arrangements for insurance, either departmentally or through subsidiaries/group companies,’’ it further stated.

Comments / feedback on the draft guidelines may be sent by email latest by December 31, 2013.
 

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