Banks Willing to Sell Policies of Multiple Insurers

When the insurance regulator wanted banks to sell insurance policies of more than one company, banks did not want to since many of them had their own insurance joint ventures or exclusive sweet-heart deals with an insurer. Now, many of them are queueing up to sell policies of even competitors as it is a way to earn higher fee income.

Axis BankBSE 0.09 %, Saraswat Bank and Indian Overseas Bank BSE 0.79 % are in the process of adopting an open architecture to sell products of more than one insurance company.

“Initially, we wanted every bank to sell products of more than one insurance company,” said Nilesh Sathe, member of the Insurance Regulatory and Development Authority (Irda). Irda has left the decision to banks to tie up with up to three companies. The industry was divided on the issue, with those which have floated their own insurance venture opposed to opening up as it would affect their exclusive tie-ups.

It will be clear with time whether banks will do substantial business by joining hands with multiple insurers,” said Girish Kulkarni, MD and CEO, Star Union Dai-ichi. For insurance companies reeling under high expenses, low-cost distribution, especially bancassurance, is important. “Bancassurance has now emerged as the primary distribution channel, with 53% share among private insurers,” Credit Suisse stated in a report.

The market share has consolidated around players with strong bancassurance partners top 4 insurers having over 60% share, and we believe distributors private banks are another good way to play growth in this industry.”