Banks say they also bear the cost of new curbs on insurance payouts. This is according to reporting by The Economic Times. So the pinch isn't only on insurers. Banks that sell insurance feel it as well.
For you, the effect is mostly indirect. Your policy and your savings aren't in danger because of this. But the way your bank pitches insurance, loans and deposits could change over time.
Key takeaways
- Banks say the payout curbs cost them money too, as reported by The Economic Times.
- The headline doesn't give the size of the curbs or a start date.
- Your existing policies and deposits aren't affected by this news alone.
- Compare the full cost of any loan before you accept bundled insurance.
How insurance payout curbs work
Banks often sell insurance at their branches. The insurer pays the bank a share of each premium for making the sale. People call this a commission or a payout.
Rules can limit how much of a premium goes to the seller. When a limit comes in, the bank earns less from each sale. Insurance regulation in India sits with IRDAI, the insurance regulator.
The report doesn't spell out the exact curbs. We don't know the size of the limit or when it starts. So the numbers below are examples only. They aren't the real rates.
What changes for borrowers and savers
Say a bank earns 10% of the premium on a policy. Now say a curb cuts that to 5%. The table shows what the bank would lose on one sale.
| Premium you pay | Bank earns at 10% | Bank earns at 5% | Bank earns less by |
|---|---|---|---|
| ₹20,000 | ₹2,000 | ₹1,000 | ₹1,000 |
| ₹50,000 | ₹5,000 | ₹2,500 | ₹2,500 |
| ₹1,00,000 | ₹10,000 | ₹5,000 | ₹5,000 |
These are made-up rates to show the idea. Now picture a branch that sells 1,000 policies of ₹50,000 each. At 10%, it earns ₹50 lakh. At 5%, it earns ₹25 lakh.
That gap is real money for a bank. It may respond in a few ways. It could sell fewer policies, or it could look for other income. Some of that could reach you through fees or loan pricing, though nothing in the headline says so.
Who is affected
The people who feel it first are bank staff and insurers. Branches often have sales targets for insurance. Lower payouts can make those targets less attractive.
You may be affected if you:
- Are about to take a loan and may be offered a policy with it.
- Plan to open a deposit and get an insurance pitch alongside.
- Are in the middle of a policy you bought through a bank.
If you already hold a policy, your cover and your premium stay the same. Your claim rights don't depend on what the bank earned.
What to do now
You don't need to rush. A few habits will protect you in any case.
- Ask if the policy is optional. A loan shouldn't depend on buying one.
- Ask for the total cost of the loan, with and without the policy.
- Use the EMI calculator to see how a bundled premium changes your monthly payment.
- Check the loan rate against the interest rate tables before you sign.
- Read the policy terms at home, not at the counter.
If you want a loan without add-ons, look at our personal loan guides. For more stories like this, visit the news hub.
Frequently asked questions
Does this news change my existing insurance policy?
No. Nothing in the report says that existing policies change. Your cover and premium stay as written in your policy.
Will my bank raise loan rates because of this?
The report doesn't say so. Banks set rates for many reasons. Compare offers rather than guess.
Do I have to buy insurance to get a loan?
Generally, no. Insurance sold with a loan is usually optional. Ask the bank in writing if you're unsure.
BankCreds analysis
Less dramatic than it sounds
This is mostly a story about bank earnings, not your money. Your existing policy stays as it is. Your savings stay as they are. The curbs only matter if they change what a branch does when it meets you.
Here's a simple case. A family takes a ₹10 lakh personal loan and is offered a ₹30,000 policy at the counter. If the bank earns less on that sale, it may push the policy less. That's good news for you, since fewer add-ons means a lower total cost.
The risk runs the other way too. A bank could try to earn the money back through fees or a slightly higher loan rate. So this week, don't change anything. Just compare the full cost of any loan offer, and say no to bundled cover you don't need.
This section is BankCreds' own assessment of what the development means for Indian borrowers and savers. It is independent commentary, not part of the source reporting above.
Sources & references
- The Economic Times — originating report https://m.economictimes.com/industry/banking/finance/banking/banks-also-count-cost-of-insurance-payout-curbs/articleshow/135034779.cms
- IRDAI — Insurance regulator that sets rules on how insurers pay for selling policies https://irdai.gov.in/
Source links are shown as plain text, not clickable links. Copy a URL into your browser to read the original report.
Editorial note & disclaimer
How this was reported. The development above is attributed to the source or sources listed. BankCreds does not independently verify a third party's reporting; where a figure or a regulatory position is stated as fact, it is either attributed or drawn from the regulator's own published material. Everything under "BankCreds analysis" is our own assessment.
Rates and figures. Interest rates, per-gram values and premium bands quoted here are indicative, move daily, and differ by borrower profile, city and lender policy. Confirm the final number with the institution before you act on it — the sanction letter or policy schedule governs, not a news report.
Not financial advice. This article is general information for an Indian audience. It is not investment, tax, credit or insurance advice, takes no account of your circumstances, and BankCreds is not a lender, broker, distributor or advisor. Consider speaking to a SEBI-registered investment adviser or a qualified professional before acting.
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