IRDAI Eases Concerns Over Bancassurance Crackdown

Context:

In a significant relief to private life insurers, the Insurance Regulatory and Development Authority of India (IRDAI) is unlikely to introduce coercive restrictions on the bancassurance distribution model, despite concerns raised over potential misselling of insurance products via banks.

Key Highlights

• IRDAI’s Position
  • No cap on insurance via bancassurance.
  • Misselling not considered alarming.
  • Focus on facilitating, not mandating, distribution.
• Misselling Concerns (2024)
  • Raised by: Finance Minister, IRDAI Chair (ex), RBI Governor, DFS Secretary.
  • Allegations: Customers coerced or misled by bank staff.
• RBI & DFS Actions
  • DFS: Ensure no forced sales, affordable premiums.
  • RBI: Working on anti-misselling guidelines for banks and NBFCs (as per FY24 Annual Report).
• Industry Impact of Proposed Cap
  • Potential 15–30% drop in bank fee income.
  • Up to 12% reduction in net profits.
  • FY24: Bancassurance earned banks ₹14,500 crore (~2% of total revenue).
• Insurance IPOs
  • No mandatory listing, says IRDAI.
  • Focus on governance, transparency, and enhanced disclosures.
• Grievance Trends
  • UFBP complaints fell 10.6% in FY24.
  • IRDAI formed a task force (Oct 2023) to improve bancassurance efficiency.

BS