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Our Bureau

The Chief Post Master General, Dr K.B.H. Nayar

Bangalore , Feb 4

INDIA Post has tied up with the public sector Oriental Insurance Company Ltd (OICL) for vending non-life insurance products.

The venture was kicked off on Wednesday in seven States - Tamil Nadu, Karnataka, Kerala, Gujarat, West Bengal, Maharashtra and Rajasthan.

Briefing reporters here after the launch of the tie-up, the Chief Post Master General, Dr K. B. H. Nayar, said that the venture would be a pilot project confined to three districts of the respective States in the initial phase.

"After about three months, the tie-up will encompass all the States in the country," Dr Nayar added.

Selling insurance is not new for India Post. It already has a life insurance product of its own postal life insurance and rural postal life insurance.

Dr Nayar said that the non-life product would supplement its insurance product availability.

Further the tie-up would allow India Post to expand its non-postal revenue kitty, currently comprising about 40 per cent of the gross revenues. This figure has been progressively increasing and helping India Post to cut its revenue deficit.

The tie-up would allow it to earn an agency commission of 15 per cent on every policy sold, consonant with the Insurance Regulatory and Development Authority (IRDA).

For Oriental Insurance, this venture would allow it to leverage on India Post network of 1.5 lakh post offices, giving the insurer a formidable reach in the country, far more valuable than any bancassurance, according to Mr. S. Gopalakrishnan, Assistant General Manager of OICL.

He said that the reach was considerably higher than any bancassurance tie up.

This was in view of the limited reach of the public sector banks. For instance, the State Bank of India and its affiliates together with a network of 13,000 branches have a reach of less than one tenth of India Post.

About 12 non-life products would be sold through the network. Among the policies being offered are agriculture specific policies to provide farmers coverage against losses due to calamities.

The first year premium accretion is expected to be Rs 500 crore. This, assuming modest target of each of the post offices selling policies worth Rs 20,000 per year.

The tie-up also would be exclusive, at least for the first three years and would be renewed after this period depending on the progress, Mr. Goplalkrishan said.

During this period, India Post would be allowed to vend only insurance products through its network. This was in view of IRDA's regulations, which allow corporate agencies to vend the products of only a single insurance company.

But industry sources said that such tie-ups would likely increase demand much beyond what is estimated.

Large increases would, however, imply that the insurer's solvency margins could come under pressure, necessitating additional capitalisation.

The demand increase is anticipated since in the past, there has been very limited insurance coverage of agricultural produce and livestock losses in the rural areas from natural calamities.

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