Citigroup splits with Birla Sun Life after deal with AIA Group

MUMBAI: Birla Sun Life Insurance faces pressure on its business after Citigroup, which contributed close to 15% of its business, exited their tie-up following an international deal to distribute products of the AIA Group, one of the largest insurance firms in Asia.

" Citi has moved out of its tie-up with Birla Sun Life Insurance," an executive with Birla Sun Life said. "They contributed 10-15% of the income on an average every year."

Birla Sun Life reported a 23% decline in new business premium income for the first six months of FY14 at Rs 658 crore, down from Rs 860 crore in the same period last year.

Citi has signed a deal to distribute products of the Hong Kong-based AIA in 11 markets, including India, for an upfront fee of over $1 billion. Hence, Citibank in India will now sell only the products of Tata AIA Life Insurance.

Insurers, which are not sponsored by banks, are struggling to grow business after the regulator capped the commission that can be paid to agents.

Bancassurance has contributed 40% of the total income for private sector companies in 2012-13, up from 35% in the previous year. In August, the insurance regulator had issued final bancassurance guidelines for banks to become brokers, keeping it optional for them. It capped business from single client at 50%.

There are around one lakh bank branches in the country but very few of them are selling insurance products. What can come as a relief to insurance companies without banks is that the finance ministry has asked all public sector banks to get into insurance broking from January 15.

In the 2013-14 budget, finance minister P Chidambaram has said that banks will be allowed to act as insurance brokers so that the entire network of banks will be utilised to take insurance reach to the far-off villages. At present, banks are allowed to sell products of one life, one non-life and one health insurance company.