A lot of insurance companies in India are joint ventures between existing banks and an
international insurance major. Some of the examples are ICICI Prudential Life, SBI Life, ICICI Lombard, SBI General, IndiaFirst Life, HSBC Canara OBC Life.
This is true for both the life
insurance and general insurance sector. The bank then becomes a distribution partner with their large network of branches. Since distribution is the major challenge for insurance companies, such partnerships offer tremendous value to both the partners in the joint venture.
However, non-bank partnered insurance companies were now finding it difficult to tie-up with any banks as they were already selling products of their partners. And as per the IRDA regulations a Bancassurance partner could sell only one insurance company’s product in life and general each. This was resulting in a non-level playing field for some of the players, especially the new ones.
To fix this problem, IRDA floated a draft guideline which divides the country into 3 Zones – A, B & C. The insurers have now been limited to tie-ups with a single bancassurance partner with a maximum of 9 states in the Zone A and 6 states in Zone B. This in effect leaves scope for other insurance companies to enter into agreements with the same bank.
While this was great news for some players, the others are un-happy as their initial agreements and business projections were based on the fact that their products could be sold throughout the distribution network and not only in parts. Plus it makes monitoring and system intregrations for more complicated as there would be multiple payers involved.
Good news for some and bad for the rest. Let’s see how it evolves!
