The Insurance Regulatory and Development Authority (Irda) has allowed banks to act as insurance brokers, subject to RBI approval. In a notification on its website, the insurance regulator said that banks may opt for the broker model to associate with insurance companies and can sell products from more than one insurer.
As per previous guidelines, a bank could associate with one life and a general insurer only, thereby acting as an agent for these companies. Each bank will have to employ an official at the general manager or equivalent level as a principal officer, to carry out functions of an insurance broker.
As per the eligibility criterion listed in the notification, a bank seeking an insurance broker licence will also need to have at least two employees with 100 hours of theoretical and practical insurance broking training from an institute recognised by Irda. A licensed broker will need to take professional indemnity insurance, the guidelines stated. Banks will have to maintain separate accounts for their broking business and the insurance regulator can conduct an investigation of these accounts at any point in time.
The issued licence would be valid for three years, Irda said. Not more than 50% of the total premium generated can be from one single client in case of a licensed broker. Each broker will also need to submit half-yearly unaudited financial statement to the regulator by October 31 and April 30, each year.
RBI, on its part, has been skeptical of banks becoming insurance brokers. It had earlier this year stated that banks turning into insurance brokers may cause a conflict of interest.