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IRDAI allows Banks to tie up with insurers

The Insurance Regulatory and Development Authority of India (IRDAI) has allowed banks to tie up with insurers.

This decision was taken as part of the IRDAI’s new Bancassurance model guidelines which will be notified soon. Prior to this decision, banks were not allowed to  have insurance agency tie-ups with more than one insurer.

As per new decision banks can tie up with nine insurers from three segments viz. life, non–life and standalone health. It will not be binding on banks and they are free to take their call.

Earlier, IRDAI had constituted a 7 member committee to study the reviewing of the existing architecture of the Banacassurance model.

About Bancassurance model

  • Bancassurance is a French term referred as selling of insurance through a bank’s. Thus it can be said that Bancassurance= Banks as Insurance Agents. In this case, selling insurance means distribution of insurance and other financial products of insurance companies through Banks.
  • Under this model banks act as a major distribution channel for insurers which in turn helps them to generate profits from alternative source.
  • This model originated in France and soon spread to other European countries.
  • In case of India a number of insurers have already tied up with banks under bancassurance model and some banks already have flagged off selected insurance products.

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Irdai sets up 3 committees to review regulations in insurance

In a row of recently passed Insurance Act, the Insurance Regulatory and Development Authority of India (IRDAI) have constituted three committees for review of regulations in insurance sector.

These three committees are formulated to regulate Insurance sector in areas of life insurance, general insurance and re-insurance that also includes registration of foreign offices of reinsurers.

Ever since the Insurance Act has been approved there was a need to review and revise existing regulations in insurance sector, these committees are the formed to fulfil the same motive.

Function

The life insurance committee will specifically work for the regulations in areas like liabilities, assets and solvency margin and appointed actuary.

The general insurance committee will specifically work for the regulations in areas like claim reserving and appointed actuary.

Reinsurance committee will specifically work for the regulations on the issues relating to registration of branches of foreign reinsurers among others.

These committees mandatorily have to submit report within one month to the Member-Actuary of IRDAI.

Background:

The Insurance Laws (Amendment) Bill 2015 passed in March, paved the way for major reform related amendments in the Insurance Laws. This amendment was done with motive to remove outdated and redundant provisions in the legislations and to provide Insurance Regulatory and Development Authority of India (IRDAI) flexibility to discharge its functions more effectively and efficiently. On line of reforms it enhanced the foreign investment cap in an Indian Insurance Company from 26% to an explicitly composite limit of 49% with the safeguard of Indian ownership and control.

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