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India's insurance regulator sees concentration risk
Sources tell CNBC-TV18 that the regulator's concerns extend beyond the issue of mis-selling.
Recent statements by Finance Minister Nirmala Sitharaman and IRDAI Chairman Debasish Panda regarding potential mis-selling of insurance through banks have sparked significant concern among insurance stakeholders.
The concern was obvious as large part of business for insurance companies comes from banks as their distribution partners
Sources tell CNBC-TV18 that the regulator's concerns extend beyond the issue of mis-selling.
The heavy reliance on banks for business is another major red flag.
According to sources, the IRDAI believes that any potential risk to banks could disrupt the insurance business and negatively impact policyholders as well as shareholders of publicly listed insurance companies.
The IRDAI has reportedly urged insurance companies to reduce the share of their business originating from banks to below 50% of their total sales.
The regulator plans to monitor this situation over the next few months. If insurers fail to meet the target, the IRDAI might consider providing a glide path for compliance.
Below is a chart which shows how much business large insurance companies receive from bancassurance channel:
Individual APE - Share of Bancassurance Channel
Period: H1 FY25
According to sources, the IRDAI also wants the share of parent banks to come down as a part of bancassurance business. Though no limit has been specified here but sources say that the IRDAI could also be monitoring this.
Below is the chart which should how much parent banks contribute as a part of total bancassurance business for insurers:
Bancassurance Business - Share of Parent Bank
Period: H1 FY25
The data highlights the extent to which insurers rely on their parent banks for bancassurance, underlining the need for diversification to mitigate potential risks.
The concern was obvious as large part of business for insurance companies comes from banks as their distribution partners
Sources tell CNBC-TV18 that the regulator's concerns extend beyond the issue of mis-selling.
The heavy reliance on banks for business is another major red flag.
According to sources, the IRDAI believes that any potential risk to banks could disrupt the insurance business and negatively impact policyholders as well as shareholders of publicly listed insurance companies.
The IRDAI has reportedly urged insurance companies to reduce the share of their business originating from banks to below 50% of their total sales.
The regulator plans to monitor this situation over the next few months. If insurers fail to meet the target, the IRDAI might consider providing a glide path for compliance.
Below is a chart which shows how much business large insurance companies receive from bancassurance channel:
Individual APE - Share of Bancassurance Channel
Period: H1 FY25
| Insurer | Share of Banks (%) |
| HDFC Life Insurance | 65% |
| SBI Life Insurance | 58% |
| Max Life Insurance | 52% |
| ICICI Prudential Life | 29% |
| LIC | 3% |
According to sources, the IRDAI also wants the share of parent banks to come down as a part of bancassurance business. Though no limit has been specified here but sources say that the IRDAI could also be monitoring this.
Below is the chart which should how much parent banks contribute as a part of total bancassurance business for insurers:
Bancassurance Business - Share of Parent Bank
Period: H1 FY25
| Insurer | Parent Bank Contribution (%) |
| SBI Life Insurance | 95% |
| HDFC Life Insurance | 80–85% |
| Max Life Insurance | 90% |
| ICICI Prudential Life | 50% |
The data highlights the extent to which insurers rely on their parent banks for bancassurance, underlining the need for diversification to mitigate potential risks.
(Edited by : Anshul)
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