'Not all banks may opt to sell products of 27 insurers'

CHENNAI: Not all corporate insurance agents - banks and others - may sign up soon to distribute products of 27 insurers - nine each in life, general and health- said experts.

Even when the Insurance Regulatory and Development Authority of India (IRDAI) had allowed the corporate agents to tie up with three insurers in each segment, not many had opted for that.

"The nine tie ups in each sector were recently prescribed. We have distribution tie-ups with three life insurers and two general insurers," S.Krishnan, Managing Director and CEO, Tamilnad Mercantile Bank Ltd (TMB) said.

The TMB has signed up as a corporate agent for Bajaj Allianz Life Insurance Company Ltd on Friday.

"Not all banks have three insurance tie ups even now," said Tarun Chugh, Managing Director and CEO, Bajaj Allianz Life when asked as to why not totally open up the distribution network.

Insurers are happy with the opening up of the distribution network as they need not shell out huge sums as a sign-in bonus to banks as corporate agents.

Earlier, when the banks were allowed to distribute products of only one insurer, the insurance companies paid a sign-up bonus to the banks under various heads, industry officials not wanting to be quoted had told IANS.

For the life insurer's banks with their wide branch network and acting as corporate agents bring in sizable volume of business.

"Fifty two per cent of our business is brought in by banks and other partner channels," Tarun Chugh, Managing Director and CEO, Bajaj Allianz Life said.

On the other hand, Emkay Global Financial Services Ltd has a different take on the IRDAI's decision.

In a report Emkay Global said the increase in the distribution tie ups for banks and others does not look promising for the policyholders.

"Instead, it may well turn out to be a great opportunity for corpor ate agents, who will push products based on the benefit they themselves get rather than customers' best interest," Emkay Global said.

Like any other financial product, a unique product offering has a fairly short life before being replicated by other players. In this backdrop, it will be nine (assuming a corporate agent uses this limit) insurers under each category fighting at the distribution point to sell nine similar products.

As regards offering a better choice, customers always had the option to buy a policy of their choice outside the bank or a non-banking finance company (NBFC).

"It is perplexing to note that such an increase in limit showcases the Regulator's belief that an individual (agent) can well understand the product of one life, general and health insurance and can hence tie-up with a maximum of one insurance company under each category (life, general and health), but an individual, once working in a bank/NBFC, is allowed to deal with nine times more companies (and likely products), that too in addition to his core work of dealing in banking products and services," Emkay Global said.

"This increase in limit for tie ups and the relaxed commission norm s would handicap the industry and harm policyholders by making the already-powerful distributors even more dictatorial," the report adds.