In some cases, parent banks of insurers are selling over three-fourths of the policy, the official, who did not wish to be identified, told reporters in Mumbai
Mumbai: Insurance industry watchdog Irdai wants insurers to diversify their distribution channels and may unveil new regulations to check their overdependence on a single entity like parent bank for selling policies, an official said on Thursday.
“IRDAI may bring regulations to limit over-dependence of insurance companies on parent banks in bancassurance areas,” said the official adding that new regulations will follow stakeholder consultations and exposure drafts.
Insurers will have to tie up with more Banks to reduce dependency on parent bank and heavy reliance on a single channel is unsustainable, said the official.
In some cases, parent banks of insurers are selling over three-fourths of the policy, the official, who did not wish to be identified, told reporters here.
When asked about allegations of forced selling or mis-selling of policies, the official said that when clear concerns are being communicated by top officials including the Finance Minister Nirmala Sitharaman, it is upon the industry to internalize the message.
Earlier, union finance minister Nirmala Sithraman and IRDA chairman Debasish Panda had raised concern over issue of banks mis-selling insurance products to their customers.
The official said the regulator cannot ask the entities to drastically reduce the reliance on parent entities or bancassurance model overnight to very low levels as it can have a destabilizing effect.
“Overall digital growth, orderly growth and removal of concentration in areas is necessary,” the official said.
The official explained the reliance on the bancassurance model makes lives easy for the companies and may be complacent as well.
However, the regulator has a better understanding of how the entire industry is working and how it is aligned to the broader policy priorities, the official said.
Sitharaman had spoken on the need to curb insurance mis-selling practices pervasive in India’s banking system. She
emphasised that today’s banking system needs to rein in the miss-selling of insurance products and other issues that raise customer costs.
“While the bancassurance model has significantly contributed to improving insurance penetration across the country, it has also raised concerns about instances of mis-selling. It has contributed in indirect ways of increased cost of borrowing for the customers,” she had stated.
Panda had cautioned lenders against the ‘ills’ that have crept into the bank-led insurance distribution and said that there was a need to restore customer confidence in the system.