Allow banks to sell policies of 5 cos: Life Insurance Council
New Delhi: Life Insurance Council (LIC), an industry association, has suggested that a bank should be allowed to sell products of five different insurers.
At present a bank is allowed to sell products of only one life and one non-life insurance companies as an agent.
The council has recommended that a bank can tie up with at least five insurers with not more than 25 percent share per insurer.
It will be presenting a note to IRDA for consideration soon, sources said, adding it is up to the insurance regulator to accept or reject the proposal.
IRDA is yet to come out with the final guidelines on the bancassurance.
Some of the insurance companies like Tata AIA, Aviva, DLF, Bajaj and Reliance Life have supported the recommendation, sources said.
Even Finance Minister P Chidambaram had favoured the idea of bank acting as broker for selling products for penetration of insurance in the country.
"At present, the policy on Bancassurance is 'one bank one insurance company (one life and one non-life)'. In this arrangement, the bank acts as the agent of the insurance company," the Finance Minister had said.
"It is desirable that banks may act as 'Brokers' where the fiduciary responsibility of the bank will be to the policy-holder," he had said.
As insurance broker, he had said, the bank may sell the products of more than one insurance company. This will provide the intended policy-holder a bouquet of products from which he may chose the appropriate product based on his needs and will also prevent mis-selling.
"IRDA will consider notifying banks as 'Brokers' under Regulation 2(j)(v) of the Insurance Regulatory and Development Authority (Insurance Brokers) Regulations, 2002," he had said.
In bancassurance model, banks sell products of insurance companies and the present law allows a bank to sell insurance product of one company as an agent.
However, some banks want to convert into a "broker", beyond the present role as "agents", which will allow them to hawk the offerings of more than one insurer.
So far, IRDA has sounded positive on the demand, but RBI wants banks to restrict to one single company and continue being an "agent".