Insurers’ valuations may sink

Valuations of insurance companies, tied to banks, are set to plunge, given the new distribution policy pursued by the regulator. Global insurance companies such as Dai-ichi and IAG (Insurance Australia Group) may pay a lower premium to raise their stake in the joint venture with banks.

The IRDA  has proposed a mandatory open architecture, where one bank will have to sell products of multiple insurance companies. As per the draft norms, banks will have to sell products of three companies, with one not exceeding 50% of the promoter company over the next four years.

At present, under the corporate agency tie-up, banks sell one life insurance, general insurance and specialised insurance like standalone health insurance. “Fresh valuation could be lower from what IAG had earlier paid,” said Bhaskar Sarma, managing director and CEO, SBI General Insurance.