Irda may allow banks sell products from multiple insurers

The new norms will help banks in using their entire network of branches to increase penetration of not only banking but also insurance product.

The Budget announcement also had said that banking correspondents will get the nod to sell micro-insurance products.

The new norms will,however,take into account the finance minister P Chidambaram’s concern about mis-selling of insurance products and have some stringent provisions,the sources said.

There have been allegations of banks forcing policies upon customers while giving loans,which then have led to the customers discontinuing to pay the premium and the insurance company gaining from high surrender charges.

To avoid such instances,the new guidelines are likely to make it mandatory for banks to ensure that a majority (over half) of the policies they sell are renewed. In case they are unable to do so,it could lead to them losing the licence to sell insurance products in the future and termination of the agreement with the insurance company.

To prevent mis-selling and increase transparency,the norms will also specify the need for qualification and training of the bank personnel selling these products,besides an emphasis of compliance with KYC norms by banks and additional monitoring of the same by insurance companies. The new norms may also allow banks to enter into agreements with multiple insurance companies zone-wise.

The move to allow banks to sell products of many insurance companies follows the government’s concern over the country’s abysmal insurance penetration levels. However,the RBI has warned that allowing banks to be insurance brokers could result in a conflict of interest in cases where the bank is the promoter of an insurance company.