Cautious IRDA delays Bancassurance norms to mend hitches

Dear Viewers,

The insurance industry will have to wait a while longer for IRDA's guidelines on bancassurance because the insurance regulator is yet to iron out a few challenges and problems, reports CNBC-TV18's Mitra Joshi and Gopika Gopakumar.

Bancassurance, also known as Bank Insurance Model (BIM), is a move that will allow banks to tie-up with two insurance companies to increase distribution — one focussed on life insurance, and one on the non-life part of the business. However, the industry itself is split over whether the new bancassurance norms should be released.

The industry is divided into two different groups on the new bancassurance norms. "There are people who already have strong bancassurance tie-ups and hence, don't want to loose those tie-ups or dilute them by ensuring that the bank has an option. And, there are those who don't have strong tie-ups, and it will mean extra distribution to them. It will also enhance their reach by many folds," said Sanjiv Bajaj, managing director of Bajaj Capital

For IRDA, however, the question goes beyond this. It forsees challenges to on-ground implementation, and has delayed releasing the guidelines.

The key areas of concern pointed out by the IRDA include issues pertaining to training, licensing and certification of the employees selling these insurance products. There is also the fear that mis-selling can also rise. Also, since banks will become virtual brokers, there is potential for a conflict of interest over the products sold.

These concerns aside, the IRDA agrees that bancassurance will bring much-needed business to the insurance industry as it deepens the market and ensures better quality of sales. And, it is these positive aspects that have the Life Insurance Council pushing for quick release of bancassurance norms.

“We would certainly want this to come out quickly. We are losing time, especially in a market which is depressed, economic sentiment is low, people are getting investor averse, saving averse. Institutions like banks wherein customers have implicit faith could be an ideal distribution partner with insuring proper cheques and balances,” said SB Mathur, the secretary general of Life Insurance Council.

However, IRDA is adamant that it will release the guidelines only when it is sure the customer's interests remain protected.

.....EDITOR