IRDA to finalise bancassurance modality

new delhi: in a bid to improve insurance penetration in the country, insurance regulatory and development authority will finalise the modalities of 'bancassurance' after discussing it with reserve bank and indian banks association by november. speaking at a ficci seminar on insurance, irda chairman n rangachary said that the regulator would discuss with rbi, iba and other banks and insurers the concept of bancassurance, which involves joint efforts of banks and insurers in devising products and selling them.accordingly, it would be incorporated in the new legislations on brokers and agents, which is currently awaiting parliamentary nod. the move comes in the wake of irda's efforts to increase insurance penetration in india from the meagre 2.1 per cent of the gdp now. "insurance penetration is only 2.1 per cent of gdp and so there is a need to improve," joint secretary (insurance) in the ministry of finance ajit sharan said. competitive advantage would have to be derived through distribution strategy and by entering into strategic alliances with banks and corporates, he said. rangachary was, however, apprehensive of the inclusion of cooperative banks in bancassurance as they had certain "intrinsic deficiencies" over financial reach and management richness. in case they are included, he said, their capital requirement, solvency ratios and managerial competence would have to be similar to those of other companies and banks. considering the stringent provisions for brokers and agents, which were coming in the way of increasing sales of insurance products through banking channels, rangachary said the regulator was considering changes in section 42 of the insurance act. he said the new norms for brokers and agents would be implemented in the beginning of new year if government amends the legislations by december. on pension, the irda chief said the regulator would submit its report on the spread of pension cover in the private sector to the ministry of finance by october end. health insurance, rangachary said, was yet to pick up as no company intended to set up a stand-alone subsidiary only for this sector. moreover, he said the country lagged in terms of standardisation in hospital services, discouraging insurers to come forward. in this context, he said third party administrators in health sectors should act as responsible intermediaries and influence hospitals to improve their services.