More options for customers as banks plan tieups with multiple insurers
NEW DELHI :DBS Bank India has announced the introduction of its open architecture platform, wherein it will offer life insurance products from three different companies. While the bank was already in partnership with Aviva India Life Insurance, it has now also tied up with Tata AIA Life and Birla Sun Life. Traditionally, if you are a customer at a bank, the bank has a tie-up with only one insurance company and offers its products through their network. DBS Bank is now offering all the life insurance products from these three companies, and is also exploring tieups in general and health insurance space.
Going forward, more banks are likely to have similar tieups with multiple insurers. Anuraag Sunder, director-insurance, PwC India, said that both large public and private sector banks are looking at such tie-ups. “But the effect of this will be seen only 12-18 months after the deal is done. It is not going to be an easy process,” he said. We take a look at how should you approach this new system .
WHAT IS OPEN ARCHITECTURE?
Usually banks tie-up with one insurance company and sell their products through their bank branch network. This is called bancassurance. According to regulations notified in 2015, the Insurance Regulatory and Development Authority of India (Irdai) has allowed corporate insurance agents like banks to sell policies from multiple insurers, which is called open architecture. What insurance agents follow is a tied agency model, wherein an agent or a corporate agent sells policies of only one insurer from the same line of business.
In its 2015 regulations on corporate agents, Irdai has allowed corporate agents to sell policies of up to three insurance companies in the same line of business. This means a bank can either continue to sell policies of one insurer or up to three insurers. As composite corporate agents, banks under open architecture can sell policies of up to three life insurers, three non-life insurers and three health insurers too.
WHAT IT MEANS
Open architecture—though limited to three insurers— means more choice for you. For banks, it means more products to understand, explain and sell.
Vishal Dhawan, certified financial planner and founder Plan Ahead Wealth Advisors, said that investors should take note that even though three is better than one when it comes to making a choice, there still are a lot of alternatives available beyond this.
While the open architecture will provide more products to choose from to customers of a bank, make sure that you are buying a product that suits your requirements. “But many times an inappropriate product was being bought because the investors did not spend enough time in reading and understanding the fineprint,” Dhawan said. You should know that IRDAI does provide for a free look period. “So either be sure about what you are buying, or if you are forced to buy a product, make use of the free look period to understand the limitations,” he said.