IRDA bars policy distribution under referral arrangements

23-Jul-2010

The Insurance Regulatory and Development Authority (Irda) has issued a diktat barring lenders from distributing policies under referral arrangements. Insurance companies are convincing banks to convert into corporate agents but bank sales are expected to be hit in the interim as banks will negotiate a fresh deal. The regulations will also put multi-level marketing companies out of business as they are no longer eligible to distribute.

Life Insurance Corporation (LIC) has one of the largest referral arrangements among life insurance companies. However, their sales are a very small proportion of LIC's overall sales. Two of the largest distributors for LIC under the referral model are Punjab National Bank and Vijaya Bank. In all, the corporation has over 75 banking partners, including several smaller PSU banks like Allahabad Bank. However, most of these are co-operative banks.

LIC also has a corporate agency relationship with two banks - Central Bank of India and Corporation Bank. Speaking to ET, LIC executive director AK Sahoo said the corporation will convince banking partners to become corporate agents. "LIC is willing to provide all the support that is required for a bank to become a corporate agent," he said.

In a gazette notification, the regulator has announced Irda (sharing of database for distribution of insurance products) Regulations, 2010. Under the norms, the referral company cannot be in the business of extending loans and advances, accepting deposit, trading in securities on its own account or on account of its customers. The referral company is also not allowed to be engaged in a business that has a linkage, direct or indirect, with the transaction or distribution of insurance.

Source : www.insuremagic.com