The insurance industry could soon see the entry of more foreign insurers in tie-ups with PSU banks in India. G.C. Chaturvedi, Joint Secretary, Ministry of Finance (MoF) said foreign insurance companies have expressed interest in such joint ventures.

Foreign insurers prefer to tie up with public sector banks rather than private partners because the former can provide capital, Chaturvedi said. "It is not difficult for a public sector bank to provide Rs 100-200 crore of capital as compared to private players."

He also said that several public sector banks were seeking alliances in life as well as non-life insurance. "A consortium of banks will soon enter the insurance industry. It is on the horizon," he said.

In the past, banks that have expressed interest in entering the insurance market include Bank of Baroda, IDBI Bank, Allahabad Bank, Punjab National Bank and Vijaya Bank. Chaturvedi said that amendments to the Insurance Act of 1938 were on the anvil.

The MoF official, speaking at a seminar on bancassurance, said that with around 70,000 bank branches across the country, bancassurance had tremendous potential in India, though it currently brings in just 2-3 per cent of the premium. He, however, cautioned banks not to `force sell' to customers, as this would alienate them. Banks should also study how incentives could be used to improve insurance selling, he said.

According to industry analysts, bancassurance had miles to go before developing as a distribution channel.

Nandagopal, CEO, Reliance Life Insurance, said that though bancassurance accounted for just 2-3 per cent of the overall premium, in the case of private players it was much more at 15-20 per cent.

He said that a corporate agency would provide a stable bancassurance relationship as opposed to a referral arrangement.

M. Ramadoss, CMD, Oriental Insurance Company, said that in Asia 91 per cent of the premium came from agency force, while just one per cent was from bancassurance.

(http://sify.com/finance)