Earlier the apex Bank RBI has asked the banks to work as the insurance brokers, but now RBI says that the banks should not be forced to work as insurance brokers.
In order to stop and control the mis-selling and fraudulent cases regarding the insurance products the RBI came up with the bancassurance model, where the banks were asked to work as insurance brokers. Under the existing regulations, a bank is allowed to distribute policies of one life and one non-life insurer as its corporate agency partner. Bank were asked not to sell insurance products of more than company, ut banks expressed their discomfort and stated that we have a tie-up with our insurance subsidiary. This arrangement is working fine. Why should our subsidiary sell the policies of other companies.
Most of the banks were not in favour of the RBI’s decision and were opposing it. The RBI’s working group on bancassurance has suggested that no model should be unilaterally imposed on banks and that the choice of becoming a multiple corporate agent or a broker should be left to the respective banks and their boards.