Nilesh Sathe, former member of the Insurance Regulatory and Development Authority of India (IRDAI) believes that banks should continue selling insurance, highlighting their significant contribution to promoting insurance companies and achieving satisfactory returns on capital.

Sathe, however, emphasises the need for better regulation.

Citing the rise in mis-selling complaints, he suggests that both the Reserve Bank of India (RBI) and IRDAI need to take corrective measures.

India’s insurance regulator, IRDAI, is worried about life insurance companies relying too much on a single way of selling their policies, especially through their parent banks in the bancassurance segment.

To address this, IRDAI is thinking about setting limits on how much a parent bank can contribute to the bancassurance business of its life insurance arm.

Before making any final rules, the regulator may first share a draft or consultation paper to get feedback from stakeholders.

Sathe suggests that while dependence on a single channel is risky, spreading risks through diversification aligns with the fundamental principles of insurance.

He hints that regulatory interventions could limit the percentage of business that bank-promoted insurers can generate from their parent banks.

Rajesh Sud, Managing Partner, Atisaya Partners, Former Exec Vice Chairman and CEO at Max Life Insurance highlights how banks’ wide reach makes them ideal for selling insurance.

He supports the continued use of bancassurance as a key distribution method.

At the same time, Sud stresses the need for fair practices and clear communication with customers.

He believes insurers should have the freedom to decide whether to work with one or multiple banks. “Relying on one partner is a company’s choice. The risks should be managed by the company’s board and shareholders,” he adds.

Sud’s main concern is improving customer experience. He calls for better training, clear product details, and penalties for mis-selling.

“We need to make insurance something people want, not just need,” he says, stressing the importance of educating customers and selling ethically.

Sathe points out that banks prioritise selling insurance over mutual funds due to higher commissions and revenue.

As insurance remains a push product, banks find it more profitable than other financial instruments, despite their broader role in financial planning.

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