The draft report on broadening bancassurance channel prepared by a panel constituted by the Insurance Regulatory & Development Authority(Irda)has recommended that one bank should be permitted to sell products of two insurers.
Currently, Irda regulations allow only one bank can sell one insurer’s products. For achieving higher insurance penetration and density, higher levels of policy holder servicing and for providing a proper regulating framework the committee has made a range of recommendations.
Banks may be allowed to have tie-up with any two sets of insurers which may include two in life insurance sector, two in non-life insurance sector, excluding health, two in health insurance sector and ECGC and Agriculture Insurance Corporation.
The bancassurance channel may be allowed to operate on principles of tied agency preserving the current legal status of the bank as an agent of the insurer, said the report. The tenure of the agreement between the banker and the insurer shall not be less than five years. According to the report the bancassurance regulation may provide for Irda and RBI to inspect any of the bancassurance partners.
Irda will also strengthen the inspection and off site monitoring of distribution partners as they account for the largest component of expenses. The banks will not be eligible for any compensation other than the commission payable for distribution of insurance products. The current stipulation in corporate agency regulations, barring all other payments will be applicable to the banks also.
The CEO and CFO of the bank will certify the sum total of all payments or reimbursements received by bank and its affiliates from the insurers and their affiliates on annual basis.
Discount in valuation of equity share given by insurers to bank distribution partners and all other types of payments in cash or kind shall be valued as per accounting standards, at arms length and treated as advance commission and amortised in a period not extending beyond three years.
The bancassurance regulations will also l provide for recovery of any compensation received in excess of the permitted commission, from banks and their affiliates.
Insurance vertical of the bank/SPV will be headed by an officer who reports directly to board of directors of the bank.
Corporate governance norms regarding disclosure will have to be complied by the banks treating bancassurance as integral part of bank?s business operations.