CBoP-HDFC Bank deal a big blow to Aviva Life
The proposed merger of Centurion Bank of Punjab with HDFC Bank will be a big blow to Aviva Life Insurance, as the distribution deal between the two will now be scrapped.
By TNN |
MUMBAI: The proposed merger of Centurion Bank of Punjab with HDFC Bank will be a big blow to Aviva Life Insurance, as the distribution deal between the two will now be scrapped.
CBoP had entered into an agreement to sell products of Aviva under a bancassurance agreement while HDFC Bank sells insurance for group company HDFC Standard Life. As per existing insurance laws, a bank can���t sell products for more than one insurance company. CBoP is one of the largest institutional distributors for Aviva, and is understood to bring in between 20-25% of Aviva���s premium income in India.
HDFC Bank, on the other hand, is one of the largest insurance distributors for HDFC Standard Life. CBoP customers of Aviva are unlikely to be affected, as the tie-up was more in the form of a referral arrangements and they will continue to be serviced by Aviva.
When questioned on the future of the distribution arrangement HDFC chairman Deepak Parekh said, ���The guidelines enforced by the Insurance Regulatory Development Authority (IRDA) do not allow a bank to have a bancassurance tie-up with more than one insurance company. We will now have to check, when Centurion Bank of Punjab���s contracts with their insurance partners expire. The bank currently has a tie-up with Aviva for life insurance and ICICI Lombard for general insurance.
Industry sources said the bancassurance tie-up between Aviva and CBoP had a three-year lock-in and was due to come up for renewal in September this year. However, both were expected to renew the tie-up given the level of revenues it has generated. Also, insurance commission has contributed substantially to CBoP���s profits. Although officials did not divulge the commissions earned from Aviva, they indicated that it was high double digits.
If the merger goes through, this would be the second bancassurance partnership of Aviva to have fallen through. An earlier partnership with Canara Bank had to be abandoned, as Canara Bank decided to promote its own life insurance company along with HSBC. Besides, CBoP another distribution arrangement with IndusInd is likely to be strained. IndusInd is understood to be pursuing insurance plans of its own and is in talks with US-based
insurer MassMutual.
CBoP had entered into an agreement to sell products of Aviva under a bancassurance agreement while HDFC Bank sells insurance for group company HDFC Standard Life. As per existing insurance laws, a bank can���t sell products for more than one insurance company. CBoP is one of the largest institutional distributors for Aviva, and is understood to bring in between 20-25% of Aviva���s premium income in India.
HDFC Bank, on the other hand, is one of the largest insurance distributors for HDFC Standard Life. CBoP customers of Aviva are unlikely to be affected, as the tie-up was more in the form of a referral arrangements and they will continue to be serviced by Aviva.
When questioned on the future of the distribution arrangement HDFC chairman Deepak Parekh said, ���The guidelines enforced by the Insurance Regulatory Development Authority (IRDA) do not allow a bank to have a bancassurance tie-up with more than one insurance company. We will now have to check, when Centurion Bank of Punjab���s contracts with their insurance partners expire. The bank currently has a tie-up with Aviva for life insurance and ICICI Lombard for general insurance.
Industry sources said the bancassurance tie-up between Aviva and CBoP had a three-year lock-in and was due to come up for renewal in September this year. However, both were expected to renew the tie-up given the level of revenues it has generated. Also, insurance commission has contributed substantially to CBoP���s profits. Although officials did not divulge the commissions earned from Aviva, they indicated that it was high double digits.
If the merger goes through, this would be the second bancassurance partnership of Aviva to have fallen through. An earlier partnership with Canara Bank had to be abandoned, as Canara Bank decided to promote its own life insurance company along with HSBC. Besides, CBoP another distribution arrangement with IndusInd is likely to be strained. IndusInd is understood to be pursuing insurance plans of its own and is in talks with US-based
insurer MassMutual.
Download
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
Download
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
ADVERTISEMENT
