'Banks can only sell standard insurance products through branch'

Banks will be allowed to sell only standard or vanilla insurance products through their branches following the relaxation of brokerage norms by the sectoral regulator Irda, said a financeministry official. The move is aimed at ensuring that lenders do not sell customised insurance products where risk assessment is more complex. It will also address various concerns of the Reserve Bank, including those pertaining to conflict of interest. RBI does not want banks to undertake new risk in the form of insurance broker.

 

"Products with same features will not only prevent mis- selling but also ensure that customers can chose a product based on the performance and efficiency of the insurer," the official said. Irda will ensure that all products sold through banks are standardised in terms of features and commission structure, the official added. A broking licence will allow a bank to sell products of multiple insurance firms, compared with the current bancassurance model that allows lenders to sell products of just one life and non-life insurance company.

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