IRDA may scrap proposals of bank tie up with insurance companies

With Financial Services Secretary Rajiv Takru communicating to the IRDA that the proposal to have a zone-wise tie-up with banks will be very messy, the insurance regulator may scrap the proposal that banks tie up with different insurance companies in various regions. 

The IRDA in its earlier guidelines, had proposed to divide the country into three zones and place a cap on the number of States in which an insurance company can tie up with a bank to improve insurance penetration through the banking system’s wide branch network. All the stakeholders concerned have expressed that there would be tremendous logistical problems if the zone-wise tieup is implemented,” said Financial Services Secretary Rajiv Takru.. “Servicing an insurance policy at one centre and not servicing it if the customer approaches a branch in another State is just one of the operational challenges,” said a CEO of a private life insurance company. 

Most banks, through the Indian Banks’ Association and insurance companies, had opposed the move citing operational difficulties. “We have received representations from different  stakeholders and we are looking into it,” said IRDA Chairman T. S. Vijayan. Under the existing guidelines, banks are allowed to tie up with only one insurance firm exclusively for distribution of insurance products across the country.