The IRDAI has warned life insurance companies from depending too much on banks to sell insurance policies. Banks are now the leading mode for selling policies of private insurance companies, and the share of individual agents has declined.
The Insurance Regulatory and Development Authority of India (IRDAI) had called a meeting of CEOs of life insurance companies in the last week and among other things, bancassurance was the main issue that was discussed. The fear was that if there was any possibility which obligated the RBI to stop banks from selling insurance, companies reliant on banks would see their sales affected.
The Insurance officials also said that the model of bancassurance is lined with the developed markets and banks are the dominant channel for the distribution of life products in Europe and they are raising their share in Asia. In India, banks have three models for the life insurance trade. They are promoters like ICICI Bank, HDFC Bank and State Bank of India, joint venture partners, like Oriental Bank of Commerce, Andhra Bank or Federal Bank and banks that sell insurance products without a stake in the company. The RBI has prescriptions in terms of capital sufficiency and maximum non-performing assets that can be tolerated for a bank to spend in a life insurance company. However, currently, there is absolutely no limit on banks from selling insurance.
When it comes to the share of the insurance distribution agents, it has been consistently declining from 2010-2011. However, banks are growing their share. In 2012-13, agents brought in Rs 48,831 crore of premiums, which dropped to Rs 41,246 crore in 2014-15.
In 2015-16, the total number of life insurance agents stood at 20.16 lakh, almost unaffected from the starting of the year. But the high number is because of a large number of balanced agent populations, which has a little persistence.