FinMin to push for bancassurance at bankers’ meet

According to Irda data, India is much below the global average of 6.5 per cent (of GDP) in insurance spread at 3.96 per cent.

New Delhi | Published: January 23, 2014 1:32 am

Keen to take ahead its proposed bancassurance plans, the finance ministry is set to meet public sector bankers next week to understand their concerns.
“Finance ministry officials including financial services secretary Rajiv Takru will meet bankers on January 28 to review the issue,” said a person privy to the development.
To get banks on board for the plan, which is a part of finance minister P Chidambaram’s Budget 2013-14 announcement to help increase insurance coverage, the ministry is understood to be agreeable to some amount of relaxation in the current norms that seek to cap the business from the bank promoter group’s insurance company at just 25 per cent.
The finance ministry had in December last year written to PSU banks to become insurance brokers and use their branch network to expand insurance penetration.
Banks were expected to comply with the norms by January 15, 2014.
This would be a big switch from the current system where banks sell products of an insurer they have tied up with and only to their existing customers.
Since then, both the Reserve Bank of India and the insurance regulator Irda have issued guidelines on bancassurance. However, the model could have a direct impact on banks’ liabilities as unlike a corporate agent, an insurance broker is liable to the consumer.
Banks have been worried that by selling products, especially of multiple insurers could hurt their financial health. Further, some banks have also pointed out that at a time of rising bad loans, it may be difficult for them to deploy funds for training staff under the broker model.
According to Insurance regulatory and development  authority (Irda) data, India is much below the global average of 6.5 per cent (of GDP) in insurance spread at 3.96 per cent.

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