Hydearbad:
The insurance regulator IRDAI has clarified as to how the existing bancassurance arrangements for the public sector banks(PSBs), who are parts of the mega merger exercise effected since 1st April, 2020, will function post the merger of these entities.
Earlier, Punjab National Bank (PNB) has absorbed Oriental Bank of Commerce and United Bank — which makes it India’s second-largest bank after State Bank of India (SBI).Similarly, Syndicate Bank merged with Canara Bank, Union Bank of India absorbed both Andhra Bank and Corporation Bank. Indian Bank and Allahabad Bank's merger also came into effect from April 1.
In a circular issued on Wednesday, the IRDAI, while categorising, the four banks- Punjab National Bank, Canara Bank, Union Bank of India and Indian Bank- as ‘Acquiring Bank’ and the banks that were merged with the acquiring bank as ‘Acquired Bank’, has explained how the existing bancassurance arrangements will work among these banks out post merger.
Renewal commission applicable to acquiring banks
The acquiring banks may receive renewal commissions under the life insurance arrangements of acquired banks only after entering suitable arrangements for servicing of the policyholders.
Surrender of Certification of Registration (COR)
Acquiring bank shall retain the existing COR to act as a corporate agent and surrender COR(s) held by acquired banks by submitting written request to the IRDAI. The surrender shall be allowed subject to undertaking from the acquiring bank regarding servicing of existing policyholders of acquired banks by entering into suitable arrangement with the insurers that had arrangement with acquired banks.
In case of non-agreement between concerned insurer and acquiring bank, the insurer shall be responsible for servicing existing policyholders of acquired bank still expiry of the policy term.
Harmonisation of corporate agency agreements between acquiring banks and insurers
The acquiring bank may continue arrangement with more than 3 entities in each of the life, general and health categories of insurers for a period of 12 months from the date of merger by transfer of the existing insurance arrangements of the acquired banks to their name by way of an addendum to the existing corporate agency agreement executed by the acquired banks.
This exemption allows only for transfer of existing insurance arrangements of acquired banks to the acquiring banks and shall not be construed as permission of the IRDAI to enter into new arrangements with other insurers.
The acquiring banks shall submit to the IRDAI duly revised board approved policy on adoption of open architecture and on the manner of soliciting and servicing insurance policies,within 60 days of completion of the merger.
Transfer of Specified Persons (SPs) of acquired banksto the acquiring bank
Transfer of SPs to the acquiring bank shall be automatically recognised by the Authority on approval of surrender of CORs of acquired banks. No fee will be charged for issuance of revised SP certificates.Only the principal officer (PO) of acquiring bank shall be allowed to retain the PO certificate and the certificates granted to principal officers of acquired banks shall be automatically cancelled.