But a rush of applications from banks, to become insurance brokers is unlikely.
In its regulations on licensing of banks as brokers, Irda said each applicant (scheduled bank) should have prior approval of the Reserve Bank of India.
The licence, once granted, would be valid for three years after which it would be renewed.
M Narendra, chairman and managing director of Indian Overseas Bank, said his bank was partnering with Life Insurance Corporation of India to distribute their policies.
“Becoming a broker gives multiple choice of products to customers. It is a good opportunity but we might look at it in the future, when there is more clarity on the structure.”
The bank is also a joint venture partner in general insurer Universal Sompo General Insurance.
Insurance companies, especially the ones not led by banks, have been mooting for having an open architecture of bancassurance.
According to current regulations of Irda, bancassurance follows a corporate agent structure.
These regulations allow each bank to sell insurance products of one life, one general and one health insurance company each.
With most of the public and private sector banks already in a partnership either as a promoter or as a corporate agent with insurance companies, non-bank promoted insurers believe they have lost out on this distribution channel.
Conflict of interest is a factor, said officials, which might act as a deterrent for banks becoming brokers.
“Banks which are promoters or part of the promoter group of an insurance company would not be in a position to become insurance brokers.
"If part of a life insurance joint venture, they would likely become brokers offering products of non-life companies, and vice-versa. "However, in cases where they have both, life and general insurance in the group, it is not viable to become a broker,” said a senior public sector bank official.
In terms of business from one client, Irda said such banks cannot have more than 50 per cent premium from one client and not more than 25 per cent of insurance handled by a bank (as broker)
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