BANGALORE: One of the most spoke about proposals of P Chidambaram, previous Finance Minister was’ Banks forming into insurance brokers to sell policies,’ but on the contrary Insurance Sector claimed that the respective industry does not seem to be reactive to put these models to banks.

“In the recent meeting between private insurers and Finance Minister Arun Jaitley, the issue of banks becoming insurance brokers was also discussed. Since there has been strong opposition from the banks who have insurance joint ventures, the minister did not wish to take it up as an immediate priority," said the chief executive of a life insurance company.

Earlier Chidambaram sent a letter to the Public Sector Banks if they wish to become insurance brokers (so they could distribute the products of multiple companies via their branch network). The proposal received a strong criticism by the banks as the directive did not seem to be implemented one.

“Though we expected an open architecture of bancassurance, it does not seem to be on the top of their agenda. We will look to strengthen the other channels instead," said the chief distribution officer of a mid-size life insurance company that does not have a bank partner.

The insurance regulator directed that Banks becoming insurance brokers should become mandatory, talking in interest of the industry on the whole. The present structure allows banks to sell products of only one life, one non life and one health insurer.

The net non-performing assets (NPAs) of several banks have been disqualified from becoming brokers as it rose above three per cent, which disqualifies them from becoming brokers. In 2013, The Reserve Bank of India has drafted the guidelines for becoming the insurance brokers as the banks having net NPA of less than 3 percent for the previous financial year.

January 15, 2014 marked the amendment of the model as several PSB’s opposed the proposal. Soon after this RBI revised the model with representatives from various banks, the final report is yet to be revealed.

Bank is liable to customers when it comes to insurance policy, but as an insurance broker when it has to deal with whole of a corporation, liability, risk, responsibilities increases as bank will sell products of multiple insurers.