bangalore i mumbai the insurance regulatory and development authority irda has issued a diktat barring lenders from distributing policies under referral arrangements insurance companies are convincing banks to convert into corporate agents but bank sales are expected to be hit in the interim as banks will negotiate a fresh deal the regulations will also put multilevel marketing companies out of business as they are no longer eligible to distribute life insurance corporation lic has one of the largest referral arrangements among life insurance companies however their sales are a very small proportion of lics overall sales two of the largest distributors for lic under the referral model are punjab national bank and vijaya bank in all the corporation has over 75 banking partners including several smaller psu banks like allahabad bank however most of these are cooperative banks lic also has a corporate agency relationship with two banks central bank of india and corporation bank speaking to et lic executive director ak sahoo said the corporation will convince banking partners to become corporate agents lic is willing to provide all the support that is required for a bank to become a corporate agent he said in a gazette notification the regulator has announced irda sharing of database for distribution of insurance products regulations 2010 under the norms the referral company cannot be in the business of extending loans and advances accepting deposit trading in securities on its own account or on account of its customers the referral company is also not allowed to be engaged in a business that has a linkage direct or indirect with the transaction or distribution of insurance it is a complete shocking development as the move could impact our existing referral arrangement with lic said a senior official with vijaya bank an official with pnb who did not wish to be identified said it is reexamining how the distribution arrangement would work in the days or months ahead we entered into the agreement with lic slightly over a year ago our understanding is that the rate of commission would be drastically slashed under the norms we may have to revamp the existing referral to go into a corporate agency model the official from pnb told et similarly private sector life companies aim to convert their distribution into bancassurance aviva life insurance has a distribution arrangement with rbs and indusind bank bajaj allianz life insurance has a referral arrangement with standard chartered bank referral arrangements have got a bad name because multilevel marketing companies have been using the referral route for creating pyramid structures in life insurance distributions some of the mlm firms that are distributing for life companies include golden trust peerless amsure rmp and tc a large number of private life insurance companies have been using these mlm companies to build up volumes in life insurance sales the other distributors that will be badly affected will be the small cooperative banks most of the smaller banks will not be able to fulfil the