Budget 2013: FM permits insurance cos to open branches at will in non-metro cities

MUMBAI: Finance Minister P. Chidambaram turned liberal with insurance companies by permitting them to open branches at will in non-metropolitan cities and become trading members of stock exchanges in the debt segment.

Also, all towns with population above 10,000 will have one Life Insurance Corporation office and one public sector general insurance company office, which raise the access, but may strain the finances of insurers. LIC now has 2300 branches.

Banks will be allowed to act as brokers for selling insurance products of multiple companies. At present, banks under the bancassurance policy can sell products of just one insurance company.

Now, banks can sell products of all 44 insurance companies. Banks will apply for a broking licence and will have to comply with broking regulations. Banks will set aside capital for the company.

“There is need to educate people against mis-selling, given that banks will be allowed to sell policies of all insurance companies,” said S B Mathur former LIC Chairman.

Insurance companies will be directly allowed to trade in debt market, subject to regulatory approval. Irda was not in favour of allowing banks to trade directly in the debt market, as it will expose them to higher risk. Cost for insurance companies will come down.

KYC of banks will be eligible for insurance companies to issue policies. This is expected to facilitate sale of new policies.
The banking correspondents will be allowed to offer affordable insurance products to the rural and semi-urban population.

The government health scheme or Rashtriya Swastha Bima Yojana will be extended to cover autorickshaw pullers, taxi drivers, sanitation workers and rag pickers.