Irdai establishes a commission to boost banks’ involvement in the sale of insurance goods

A high-level panel has been established by regulator Irdai to recommend ways to encourage banks to participate in making insurance products easily accessible throughout the nation. The contribution of the lenders as corporate agents was 5.93 percent of non-life premiums and 17.44 percent of new business premiums for life insurance in 2022–2023, notwithstanding the extensive network of banks through their branches throughout the entire nation.

According to Irdai, banks are involved in the distribution of insurance products in their capacities as master policyholders, corporate agents, or both, subject to the relevant regulatory framework.

It stated that although banks have the option to establish a different legal company to act as insurance brokers for the distribution of insurance goods, they have not yet taken this option.

The Insurance Regulatory and Development Authority of India (Irdai) stated in a circular that "leveraging the vast bank branch network is one way of reaching the last mile and making insurance products available to the nook and corner of the country" when establishing the taskforce on bancassurance.

The regulator stated that in order to accomplish the goal, it is deemed necessary to examine the current bancassurance intermediation model and make any required changes to the regulatory framework that oversees it, with an emphasis on safeguarding the interests of policyholders.

J Meena Kumari, Executive Director (Life), IRDAI, is leading the task team. Banks and insurance industries are also represented on the panel.

The group has been requested to recommend regulatory provisions regarding bancassurance partners' market conduct standards, particularly in light of allegations regarding forced and misrepresented sales under the distribution model.

Additionally, it will assess the efficacy of the current bancassurance model of insurance intermediation and make recommendations for strategies to boost its performance.

The panel will also look at this model's international best practices and recommend appropriate changes to the national regulatory requirements. The task team has been given two months to provide the Irdai with suggestions.