SBI doors may well remain closed for other insurance companies

State Bank of India’s doors may well remain closed for other insurance companies for distribution as it may take time for it to educate its staff about insurance even as sale of policies of its own subsidiary SBI Life is just limited to a few thousand branches.
Roughly, only a quarter of the branches of SBI are “active“ at present. For a branch to be active, it has to sell 2-3 policies a month.
“Currently, SBI’s view is that they will not open up the branches to other insurers for at least the next financial year,“ said a source close to the development. “SBI Life is not expecting any change in 2017-18.“ State Bank of India has close to 16,000 branches. All its associate banks has another 6,000 branches.Today, bancassurance channel is the fastest growing channel for SBI Life, growing at around 50% while agency channel is growing at 28%.The bancassurance channel contributes 55% of the total premium income for the life insurance company.
Irda had allowed open architecture earlier this year whereby a bank is allowed to tie-up with a maximum of three life insurers, three general and three health insurance companies. The regulator has left the decision to tie up with multiple insurers up to the banks.
SBI Life declined to comment on the story . An email sent to SBI remained unanswered. There are other restrictions like training of staff. Employees have to be licensed to sell insurance. “Since it is so nascent, and half the people do not have any experience in selling insurance, SBI decided to go with SBI Life,“ said the person quoted above. “If SBI opens up, it will have to sell three life, three non-life and three health (covers).“
The board of each bank has to take a call. Bank has become the most important channel for distributing insurance products. The industry was divided on the issue. Bank-promoted insurance companies were opposed to opening up as many believe that cross-selling is at a nascent stage.