The Department of Financial Services (DFS) has indicated that it will not take action to impose restrictions on the bancassurance channel, according to sources who spoke to CNBC-TV18. This development came during a meeting held last week between DFS Secretary M Nagaraju and CEOs of life insurance companies. The meeting covered several critical industry issues, including persistency rates, mis-selling levels, and investments in government securities.
During the meeting, life insurance CEOs made detailed presentations on various industry challenges. The DFS Secretary acknowledged that bancassurance could play a vital role in deepening insurance penetration across India. He conveyed that life insurers are free to expand their bancassurance operations, provided they maintain low levels of mis-selling.
Key Takeaways from the Meeting
- The DFS Secretary suggested that insurers strengthen their post-sale engagement with policyholders when policies are sold through banks or agents.
- One idea discussed was the possibility of mandating video recordings of insurance sales to policyholders by banks or agents to enhance transparency.
- The DFS’s stance on bancassurance comes at a time when the Insurance Regulatory and Development Authority of India (IRDAI) had previously considered measures to reduce business concentration through single channels like bancassurance.
The DFS’s indication of ‘no action’ on bancassurance restrictions is seen as a positive development for the life insurance industry, which has been looking to expand its reach through bank partnerships. The emphasis on maintaining low mis-selling levels and enhancing post-sale engagement highlights the regulatory focus on consumer protection.
As the industry moves forward, life insurers are likely to focus on strengthening their bancassurance channels while ensuring compliance with regulatory expectations. The DFS’s approach is expected to provide clarity and stability for insurers looking to leverage bank partnerships for growth.
