According to industry estimates, growth in policies of life insurance companies sold through public sector banks will slow to 6 per cent in FY25.
Public sector banks are showing a declining interest in selling insurance policies in view of the ongoing concerns over misleading customers through the banking channel. As a result, life insurance policies sold by public sector banks through the banking channel declined in FY25 from a year earlier. This slowdown is due to a change in the incentive structure as most public sector banks now focus on core banking operations.
In contrast, life insurance companies affiliated to private sector banks have seen growth nearly double through the banking channel during the same period.
According to industry estimates, growth of policies sold by public sector banks slowed to 6 per cent in FY25 and further slowed to 2 per cent in March. In FY24, policies sold by public sector banks through the banking channel were 7 per cent.
Similarly, life insurance companies sold by private banks through the banking channel grew by just 7 per cent in March from 15 per cent in FY24. The growth through the banking channel was 8 per cent a year earlier.
The chief executive officer of a private life insurance company said, “The growth of insurance companies has slowed down marginally due to the slowdown in the insurance policy business sold through the banking channel of public sector banks. The main reason for this is the change in incentive schemes and the score card given to bank employees for selling insurance.”
An official of a public sector bank said, “Public sector banks do not really have the concept of giving any kind of direct incentive to their employees selling insurance policies. But earlier there were some banks which used to give huge commission or rewards along with other incentives. Now they have completely stopped it. Apart from this, the Reserve Bank has also asked banks to focus on their core operations and our customer service business is more insurance than customer service.” As a result, there would have been a slowdown in it.’
In FY25, the growth of insurance policy sales through the bank channel of some public sector banks was in low single digits, including Punjab National Bank, Canara Bank and Union Bank of India. At the same time, State Bank of India, Bank of Baroda and Bank of India registered double-digit growth.
Finance Minister Nirmala Sitharaman and Insurance Regulatory Chairman Devashish Panda have also expressed concern about this in the conference of State Bank.
