MUMBAI: Amid growing concerns, IRDAI Chairman Debasish Panda urged banks to prioritise their core banking activities over insurance sales, a day after Finance Minister Nirmala Sitharaman’s similar advisory against mis-selling of insurance products.
Highlighting the risk of mis-selling in bancassurance, Panda noted that banks, driven by high commissions, have strayed from their main responsibilities to focus disproportionately on insurance products.
There are views expressed by some banking quarters that RBI may come out with specific guidelines on how banks can sell insurance products.
Will RBI issue guidelines?
Already unions of certain banks like Federal Bank have made representations to their management against the pressure the management is exerting on employees to sell insurance products.
Many unsuspecting customers have burnt their fingers by buying insurance products after being misguided by the bank employees that the investment is a one-time affair.
“In many cases the bank customers who bought these products have lost their investments as they were unable to continue with the regular investments in such schemes,” a Federal Bank employee told businessbenchmark.news.
Widespread mis-selling
With most major banks owning or partnering with insurers, mis-selling has reportedly become widespread, often elevating borrowing costs for customers.
Addressing the SBI annual conclave, Panda stressed that while bancassurance is a valuable channel for insurance penetration, it should remain an incidental function, not the primary one.
He warned against the ills permeating the system and called for a collaborative effort to restore confidence and fair practices.
The regulator’s statements align with RBI’s recent actions, which include imposing penalties on banks for mis-selling insurance policies, indicating a unified regulatory stance.
Both the IRDAI and RBI are emphasising the importance of protecting consumers and maintaining integrity within financial services.
Solvency
Panda further elaborated on IRDAI’s evolving risk management framework, which aims to uphold solvency and operational flexibility for insurers.
He reiterated the goal of a fully insured, “Viksit Bharat,” emphasising stakeholder alignment in protecting policyholders.
With these developments, it’s clear that the pressure on banks to curb aggressive insurance sales practices is mounting, and stricter guidelines may be forthcoming to prevent further exploitation. Regulators seem poised to enforce measures ensuring banks deliver both financial stability and consumer trust.
