As per the draft guidelines, RBI would allow banks with good credentials to operate as insurance brokers and leverage their branch to increase the penetration of the insurance sector
The Reserve Bank of India (RBI) has decided to permit banks to become insurance brokers in order develop the insurance sector in the country. RBI will allow banks to offer policies from different insurance companies to their customers apart from their own insurance subsidiaries’ policies.
RBI, in its draft guidelines, said, “In order to enable banks to leverage their branch network for increasing insurance penetration, it has been decided to permit banks to undertake insurance broking business departmentally, subject to the requirements, including the minimum eligibility criteria.”
However, banks must ensure transparency and disclose remuneration received from various insurance companies, the central bank said.
The draft guidelines states, “In order to ensure transparency, banks should disclose to the customers, details of remuneration (in any form) received from various insurance companies for the broking business. The details of fees/ brokerage received in respect of insurance broking business undertaken by them should also be disclosed.”
A bank which desires to become insurance broker have to take prior approval and fulfill minimum eligibility criteria with RBI. Its approval will be based on validity period for three years and subject to review thereafter.
“Insurance broking is a knowledge intensive activity which requires professional expertise so it will be permitted subject to the certain conditions,” said RBI in its press release.
RBI in its draft, on entry of banks into insurance broking business has setup following eligibility criteria as per published accounts as on 31st March of the previous year,
However, according to RBI draft, bank which offers insurance broking services shall not enter into any arrangement for corporate agency or insurance referral business to avoid any conflict of interest.
RBI has invited feedback from the stakeholders on the draft norms and given time period till 31st December 2013.
Earlier, finance minister, P Chindambaram in the budget speech of February 2014 said that, banks will be permitted to act as insurance brokers. Insurance Regulatory and Development Authority (IRDA) already allowed banks to act as brokers and sell products of more than one insurer to increase the penetration of the insurance sector across the country.
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