Bancassurance Street is quite a Splitsville

MUMBAI: The Insurance Regulatory and Development Authority is wondering if allowing banks to sell multiple insurance products would be the way forward.

But until the Insurance Act is amended to that effect, banks will be busy ditching their insurance partners and re-marrying someone else.

The reasons for divorce varies from lower commissions to inadequate support.

Lower assistance provided by the insurer to the bank too is a major reason behind the replacements.

“Banks, especially co-operative banks need assistance to help them sell products initially. If they find the support lacking they may want to change partners,” says V Viswanand, senior vice president and head of bancassurance at Max New York Life.

Recently, Punjab Maharashtra Urban Co-operative Bank parted ways with ICICI Prudential Life and signed up with Max, Viswanand said.

Banks examine a prospective life insurance relationship thoroughly as there are several players available, but only one tie-up possible.

Currently, a bank is allowed to sell the insurance products of only one company through the corporate agent route. The commissions range as high as 40% in the first year, 7.5% in the second and the third year and 2% on single-premium policies.

Earlier, way back in 2004, Allahabad Bank left ICICI Pru for Life Insurance Corporation (LIC).

Centurion Bank of Punjab (CBoP), which distributed products of Bajaj Allianz Life Insurance for three years, now sells Aviva Life Insurance products at its branches.

“It was not a revenue-based decision. But, we wanted to offer our clients a wide range of products and so we changed the partner,” said Rajiv Bhalla, product head - bancassurance, at CBoP.

Similarly, Bank of Rajasthan switched from Birla Sun Life Insurance to LIC. IndusInd Bank too has changed its insurance partner.

Rishi Piparaiya, country insurance director at Citibank, however, says the world’s largest bank has stuck with Birla Sun Life. The tie-ups are usually scheduled in a contract form with the tenure varying from bank to bank. “Citibank has always renewed ours with Birla Sun Life,” says Piparaiya.

Yet others are going solo: Allahabad Bank, Bank of Baroda and Central Bank are all planning to float their own insurance company, so their existing insurance distribution agreements would change.