The insurance regulator, IRDA may tighten the norms for banks selling insurance products. The banks will have to renew at least half of their life insurance policies they sell, failing which they risk losing the licence to distribute insurance products.
In order to avoid mis-selling of the insurance products, IRDA has asked the banks to renew their policies.
In 2011, IRDA had set up a minimum policy renewal criteria for individual insurance agents. It directed insurance companies to terminate the contracts of agents who do not get at least half of the policies sold by them renewed in the subsequent year.
"We have noticed some instances of forced selling of insurance products by banks while advancing loans to customers. Hence, we are looking at calculating loss ratio (the ratios of premiums paid to the claims settled) in respect of business procured by banks so as to assess the quality of the business," said a senior regulatory official.
"One of the factors that affect persistency is the after-sale service provided to the policyholder. Currently, large number of policies are left without being serviced after the policy is sold, resulting in the policies getting lapsed," the senior official added.