With insurance regulator Irdai favouring insurers selling other financial products, industry insiders have raised concerns as some insurers, especially those not promoted by banks, will not be comfortable with selling third-party products like mutual funds.
The Department of Financial Services has proposed that an insurer may also distribute other financial products as specified by and subject to the regulations. According to Irdai, as the financial services space is interconnected, a one-stop solution may offer better accessibility and availability of financial services, leading to a greater financial inclusion.
“Insurance companies are not very comfortable with this. Insurance itself is a complex matter. I don’t think we have the kind of expertise which is needed to sell completely independent party products,” a senior official at a large non-bank-promoted insurance company told FE.
“Insurance companies don’t have the expertise to sell other financial products. So, the focus of our agents to sell our own products may get diluted,” the official said. “If an insurance company sells other financial products, then it would need to deploy a certain number of people for it, and set up arms for monitoring and compliance. Then the focus on insurance will get diluted.”
According to industry insiders, the proposed arrangement of insurers selling other financial products might help life insurers like ICICI Prudential Life, HDFC Life and SBI Life, and general insurance companies like ICICI Lombard, HDFC ERGO and SBI General Insurance, who have the backing of strong bancassurance channels.
Irdai favours the one-stop-solution concept as it feels interoperability would help all financial service providers to reach every nook and corner of the country faster. Customers may also find it easy to communicate with one financial adviser or agent instead of multiple touch points.
“Allowing insurance intermediaries to sell insurance products is fine. But insurance companies themselves selling third-party products looks a little bit difficult. Because now this is the era of outsourcing, keeping only those employees who are my stuff. I cannot allow my core stuff to go and sell something else (such as mutual funds). Intermediaries can be common – insurance intermediary or mutual fund intermediary or banking correspondent. That is the idea of freeing up the distribution channel,” a senior executive of a private insurance company said.
“The thought behind allowing insurance companies sell other financial products may be that all financial services providers should be able to sell all insurance products. One can say it is a very aggressive thought. Basically, Irdai wants to free up the distribution space using the extensive network of entire financial services,” the executive said.