Insurance regulator IRDAI has allowed the four banks, emerging from the recent mega bank merger exercise, to continue for a year with existing bancassurance agreements of the lenders that amalgamated with them.
“The acquiring bank may continue arrangement with more than three entities in each of the life, general and health categories of insurers for a period of 12 months from the date of merger by transfer of the existing insurance arrangements of the acquired banks to their name,” the regulator said.
This exemption allows only for transfer of existing insurance arrangements of acquired banks to the acquiring banks and should not be construed as permission by the Authority to enter into new arrangements with other insurers, said a communication to heads of the banks concerned from IRDAI Member (Life) K.Ganesh.
The communication applies to Punjab National Bank, Canara Bank, Union Bank of India and Indian Bank that, on April 1, had a few banks merging with them as part of a government plan to create larger banks.
As per bancassurance regulations, a bank can only market three life, general and health insurance companies’ products. The banks that have been merged with them also had bancassurance business.
The IRDAI eventually wants the acquiring bank to retain the existing certificate of registration to act as a corporate agent and surrender COR(s) held by acquired banks by submitting written request to the Authority. The surrender shall be allowed subject to an undertaking from the acquiring bank regarding servicing of existing policyholders of acquired banks. “In case of non-agreement between concerned insurer and acquiring bank, the insurer shall be responsible for servicing existing policyholders of acquired banks till the expiry of the policy term,” the communication said.
It also advised the acquiring banks to submit duly revised board-approved policy on adoption of open architecture and on the manner of soliciting and servicing insurance policies, as per IRDAI regulations, within 60 days of completion of the merger.
Consequent to the bank mergers, the combined entities have come to hold stake, beyond the permissible limit, in more than one insurance company, an aspect the IRDAI communication did not touch.
