With regard to the broking license, allowing banks to sell products of multiple insurance companies, the Finance Ministry said that banks will be allowed to sell only standard or vanilla insurance products through their branches. This statement was made at the time of relaxing of brokerage norms by the market regulator Insurance Regulatory and Development Authority.
Justifying the move, the officials from finance ministry said that this move aims at ensuring that banks do not sell customized products where risk assessment is more multifarious. Also products with same terms and conditions will not only check mis-selling but will also ensure that customers get a choice of variety of products.
IRDA has also prescribed the minimum requirement for bankers to act as a broking agent and qualify for a license. These are as under:-
Each bank should have a principal officer who should atleast be in a category of a General Manager or equivalent category.
He must be appointed exclusively for carrying out the function of insurance broker
License validity will be for a period of 3 years and banks can apply for its renewal 30 days prior to its expiration
Deposit of Rs. 50 lakhs shall be kept with scheduled bank and this should be kept before commencement of the insurance business
At present insurance penetration in India is around 4.4% of the GDP, and with banks having wide set-up of delivery channel, it can be leverage to increase insurance penetration in the country. Current banassurance model allows banks to sell products of just one life and one non life insurance companies.