Bandhan, the country’s largest micro-lender based in Kolkata, and IDFC, a diversified financial services firm with a special focus on infrastructure financing, were given new bank licenses in April 2014.
Similarly, United Bank of India tie-up would mean that LIC’s products are sold across its branches. The bank was earlier in a tie-up with Tata AIA Life.
While insurance agents are the biggest contributors to the new business collections of LIC, corporate agents-banks are the second largest with respect to the business generated.
For instance, for the April to December (April 1-December 31) 2014 period, LIC had Rs 22,270.94 crore worth business in the individual segment coming from individual agents, while Rs 683.06 crore was from banks as corporate agents. Here, corporate agents-banks was the second largest channel with respect to business acquisition, as per LIC’s public disclosures for the period.
In the group segment too, individual agents contributed Rs 698.64 crore of the new business, while banks as corporate agents contributed Rs 11.04 crore during the April to December period. Here, bank channel was the third largest behind direct business (Rs 27,659.50 crore premium) and individual agents.
LIC has tie-ups with several public sector banks including Allahabad Bank, UCO Bank, Syndicate Bank, Dena Bank. The insurer also had a tie-up with Bandhan Financial Services, which as per LIC’s website was till February 7, 2015.
At present, banks can only tie-up with one life, one general and one health insurance company, apart from specialist insurers. However, in its recent exposure draft on corporate agents, Insurance Regulatory and Development Authority of India (IRDAI) has said that no bank can get more than 90% business from one insurer in the first year and that this should be progressively brought down to 50% from the fourth year onwards.
This means that the public sector banks that have a bancassurance tie-up with LIC would have to offer products of other insurers too, but it also means that LIC will get a share of the private banks’ pie in insurance.
“If private banks have to tie-up with more than one insurer, many such banks would choose to tie-up with LIC due to a large customer base that the insurer offers across different segments,” said the chief executive of a bank-promoted life insurer.
The insurance regulator in its draft norms has now allowed banks to tie up with maximum three insurers each from life, general and health segment.