In an attempt to make Intermediaries (especially banks) more responsible for the policies they sell, IRDAI has proposed a host of regulations.
Currently Bancassurance is a preferred distribution channel for most insurance company contributing to 40 – 50 % of Insurance volumes. Banks provide access to a large number of existing client base, who are given Insurance policies through cross sell. These innocent customers transact on multiple platforms with their trusted bank and its employees, for availing all sorts of asset and liabilities products. Since Bank is a corporate agent of insurance companies, therefor banks aggressively sells insurance policies to these unsuspecting customers. This often results in mis selling of insurance.
On a compliance note, banks act as a corporate agent, representing the banks, and faced lesser regulations than other intermediaries through IRDAI. Now the new stand of IRDAI is to treat the Bancassurance channel also as a intermediary, bringing it under the rigid compliance net.
It is also proposed that the CEO & CFO of these banks will undertake and insure IRDAI that there are no mis selling happening to its customers on insurance products. This will make these banks answerable to its customers. Till now all insurance grievance used to get redirected to the insurance companies, who in turn made the customer go from pillar to post to get justice.
All of this is likely to have a major impact on the way car insurance and other insurance products are sold through banks. We can expect more cautious approach from these institutions in future.
IRDA chairman TS Vijayan said that “We are issuing corporate governance guidelines in October and this will also include issues of management control”. He also clarified that corporate agents, including banks, and their employees will be responsible for the insurance products sold by them.
These announcements comes in with the recent fines imposed by IRDAI on ICICI Lombard and other insurers for mis selling of policies.