Public Sector Banks directed by the Union Finance Ministry to act as Insurance Brokers
The finance Ministry on 23 December 2013 directed public sector banks (PSBs) to act as insurance brokers from 15 January 2014.
The Union Finance Ministry on 23 December 2013 directed public sector banks (PSBs) to act as insurance brokers from 15 January 2014.
In the Budget speech 2013-14, the Finance Ministry remarked that banks will be permitted to act as insurance brokers to increase insurance penetration and mis-selling of insurance products.
The Guidelines are as follows:
• At present the banks are allowed to sell products of one life, one nonlife and one health insurance Company.
• There is an arbitrage available for private sector banks since it is not made mandatory for them to sell multiple companies products.
• Recently Reserve Bank of India (RBI) released the guidelines for banks to become brokers with stringent capital requirements
• Banks with large bad loans, low capital and losses may not qualify to start insurance broking firms.
The Insurance Regulator and Development Authority (IRDA) on August 2013 released the final guidelines of bancassurance that the companies must not have more than a 50% exposure to any one client.
For the life insurance sector, the bancassurance (corporate agency-bank) channel accounts for 30% of total new business premium collection.
• Bancassurance is the bank insurance model (BIM).
• Banacassurance is the partnership between a bank and an insurance company.
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