IRDA plans to allow banks to tie up with 2-3 insurance cos
Quote:
Insurance sector regulator IRDA is considering whether to allow banks to tie-up with two-to-three insurance firms to sell their insurance
products, a senior IRDA official said.
At present, banks cannot have agency tie-ups with more than one insurer.
"Initially, we will be a little cautious... it (tie-ups of banks with insurance companies) can be two or three. We will then revisit the experience and come back," Insurance Regulatory and Development Authority (IRDA) Member (Actuary) R Kannan told reporters here.
Various life and general insurance firms have been asking IRDA to relax this norm (banks tie-up with one insurer).
The regulator is currently reviewing the existing Banacassurance model and has set-up a seven-member committee to study the subject.
The agency distribution arrangements through banks is generally known as the 'Bancassurance' model.
The regulator is definitely going to introduce an open architecture, Kannan said, adding, "the question is how many tie-ups the banks can have with insurance companies."
"It (banks' tie-up with two-to-three insurance companies) should be operationally feasible, administratively possible and at the same time take care of policyholders' interests," he said.
The insurance regulator is also planning to come out with a circular for insurance companies to draft policy documents in regional languages in the next three months, Kannan said.
"The circular on vernacular language is going to come out in a maximum of three months," he said.
Besides Hindi, the regulator would give options to insurance companies to come out with policy documents in the language according to their requirement.
"We will not ask insurers to come out with policy documents in all the vernacular languages as it will increase costs and the policyholders will have to pay for it," Kannan said.
There has to be some trade-off between cost and operational efficiency, he said.
The regulator has set-up a committee to look into the new direct tax code implications for insurance companies, he said.
IRDA is also working on developing early warning system for non-life insurers, he said.
Early warning system is a consolidated risk rating given to various companies on the basis of operational ratios like expense ratio, yield on investment, loss ratios and claim ratios, expense ratio and yield on investment. It helps companies identify risks and take corrective actions.
"For life insurance companies, we have already finished (already in place) and early warning system for non-life will be available in another two months," Kannan said.
The sector that witnessed subdued growth in FY'09 would witness a momentum in the last quarter of this fiscal.
"We hope that the insurance sector will see some pick-up in the last quarter of this financial year," he said.
Source- economictimes.com
