“The RBI is likely to finalise the norms by next week. The notification will be issued thereafter,” a senior RBI official said.
Under the existing bancassurance guidelines, a bank can act as a corporate agent and sell policy of one life insurer and one non-life insurance company.
The new guidelines seek to allow banks to act as a broker permitting them to sell insurance policies of different insurance companies.
Finance Minister P Chidambaram in his Budget speech (2013-14) had said, “Banks will be permitted to act as insurance brokers so that the entire network of banks’ branches will be utilised to increase penetration of insurance.”
During the first decade of insurance sector liberalisation, the sector reported increase in insurance penetration from 2.71 per cent in 2001 to 5.20 per cent in 2009. However, later, it has been declining and reached 3.96 per cent in 2012.
In order to enable banks to leverage their branch network to increase penetration, it has been decided to permit banks to do insurance broking business departmentally, the RBI said in draft guidelines issued in November, 2013.
The Finance Ministry has already asked all PSBs to switch to the broker model from the existing corporate agency structure for distribution of products.
“The present model of corporate agency selling of insurance by banks may be dispensed with and each banks may train and orient its staff to implement the Finance Minister’s Budget announcement in earnest,” Finance Ministry said in a circular.
According to the circular, banks have been asked to report compliance and progress on the issue latest by January 31, 2014.