Sales machine or advisory model? RBI’s reset for bank-led insurance
April 23, 2026
RBI’s draft rules seek to curb mis-selling in the bancassurance model through suitability checks and tighter oversight. Experts say sales may not fall, but scrutiny will rise.
The bancassurance model—where banks act as agents for insurance companies—comes with a structural conflict of interest. Customers often walk away with policies that do not align with their financial goals.
The Reserve Bank of India (RBI), in its new draft rules, has called for significant structural changes to curb mis-selling. While experts Mint spoke to do not expect a sharp dip in sales, they anticipate tighter scrutiny and changes in incentive structures.
“In a distribution-led model, product suitability often takes a back seat to sales incentives. Customers, who place significant trust in their bank, are left holding products that don't serve their financial goals.”
“Mis-selling and forced selling are longstanding problems rooted in structural conflicts of interest,” Prof. Pandey notes. He adds that banks, acting as corporate agents, lack the fiduciary duty of brokers, often leading to situations where the bank mis-sells but the insurer bears the brunt.
Regulatory course correction
The RBI has introduced draft rules—expected to be implemented by July this year—modelled on global best practices. The focus is on suitability assessments, incentive reforms and enhanced supervision.
Anupam Tyagi, internal insurance ombudsman at Star Union Dai-ichi Life Insurance, views the move as a “natural evolution” rather than a clampdown, noting that the regulator is not looking to dismantle the model.
“I see these guidelines as a constructive step,” Tyagi said. “When the regulator talks about a suitability check, banks must now implement mechanisms to verify if a product aligns with a customer's age, risk appetite, and earning capacity.”
He argues that regulators were “silent observers” during a period when banks relied heavily on fee income to cover NPAs (non-performing assets), but now that the sector is more stable, the push for transparency has intensified.
Ann Jacob
Ann Jacob is a personal finance correspondent with Mint. She writes for Mint Money, where she works to make the complex world of finance feel clear and worth paying attention to through stories that actually make sense to her readers. She holds a BA in English, with a triple major in mass communication, literature and journalism. As an alumna of the Asian College of Journalism in Chennai, she also holds a postgraduate diploma in multimedia journalism. She has earlier worked with NDTV Profit, where she spent a year and a half decoding markets, personal finance, commodity, earnings, and everything in between. Ann is particularly drawn to stories where life and money collide, right from decoding Gen Z’s changing spending habits and figuring out what really goes into building a good credit score, to exploring the everyday art of budgeting well. Her work leans into features and trend-driven stories that zoom into how one can earn, spend, and save well. In her stories, she aims to strip away the jargon, provide actionable insight from experts and write personal finance stories that are closest to reality.
The Reserve Bank of India (RBI), in its new draft rules, has called for significant structural changes to curb mis-selling. While experts Mint spoke to do not expect a sharp dip in sales, they anticipate tighter scrutiny and changes in incentive structures.
“In a distribution-led model, product suitability often takes a back seat to sales incentives. Customers, who place significant trust in their bank, are left holding products that don't serve their financial goals.”
“Mis-selling and forced selling are longstanding problems rooted in structural conflicts of interest,” Prof. Pandey notes. He adds that banks, acting as corporate agents, lack the fiduciary duty of brokers, often leading to situations where the bank mis-sells but the insurer bears the brunt.
Regulatory course correction
The RBI has introduced draft rules—expected to be implemented by July this year—modelled on global best practices. The focus is on suitability assessments, incentive reforms and enhanced supervision.
Anupam Tyagi, internal insurance ombudsman at Star Union Dai-ichi Life Insurance, views the move as a “natural evolution” rather than a clampdown, noting that the regulator is not looking to dismantle the model.
“I see these guidelines as a constructive step,” Tyagi said. “When the regulator talks about a suitability check, banks must now implement mechanisms to verify if a product aligns with a customer's age, risk appetite, and earning capacity.”
He argues that regulators were “silent observers” during a period when banks relied heavily on fee income to cover NPAs (non-performing assets), but now that the sector is more stable, the push for transparency has intensified.
Ann Jacob
Ann Jacob is a personal finance correspondent with Mint. She writes for Mint Money, where she works to make the complex world of finance feel clear and worth paying attention to through stories that actually make sense to her readers. She holds a BA in English, with a triple major in mass communication, literature and journalism. As an alumna of the Asian College of Journalism in Chennai, she also holds a postgraduate diploma in multimedia journalism. She has earlier worked with NDTV Profit, where she spent a year and a half decoding markets, personal finance, commodity, earnings, and everything in between. Ann is particularly drawn to stories where life and money collide, right from decoding Gen Z’s changing spending habits and figuring out what really goes into building a good credit score, to exploring the everyday art of budgeting well. Her work leans into features and trend-driven stories that zoom into how one can earn, spend, and save well. In her stories, she aims to strip away the jargon, provide actionable insight from experts and write personal finance stories that are closest to reality.