FinMin asks PSU banks to switch to broker model for insurance

Finance minister P Chidambaram in his Budget speech 2013-14 had said banks will be permitted to act as insurance brokers so that the entire network of banks branches will be utilised to increase penetration of insurance.

Public sector banks may join insurance broking business in order to increase insurance penetration and avoid mis-selling of insurance products, it said. At present,the policy on bancassurance is one bank one insurance company one life and one non-life. Such a move will lead to an open bancassurance architecture and will drive banks to align their interest with their customers,said a CEO of private insurance firm.

Banks can do so by offering them a wider choice of products from a larger number of life companies,instead of the existing practice of pushing products from a single firm,he added.

As per the circular,banks have been asked to report compliance and progress on the issue by January 31. Insurance and Regulatory Development Authority Irda had issued draft guidelines to allow banks to act as brokers and sell products of more than one insurer in July.