MUMBAI: State-run general insurance companies could be in line for a windfall of Rs 1,600-crore business a year, following the Indian Banks' Association's (IBA) wage deal with more than 10 lakh staffers, said two people familiar with the matter.
From now on, banks will buy health insurance cover from one of the state-run general insurance companies instead of reimbursing the medical expenses of staff in full which goes as part of their expenses, they said. This could also reduce the expenses and put a cap on the liabilities of banks in the future. "This is a path-breaking agreement," said TM Bhasin, chairman of IBA and CMD of Indi an Bank. "Besides a 15% hike and holiday on alternate Saturdays, it is mutually agreed that the bank will buy medical cover for the employee and his family."
Bank employees unions, including that of State Bank of India (SBI) and the industry body representing state-run banks, agreed on a 15% increase in their basic salaries for the period 2012 and 2017. One new factor that crept into the agreement this time, other than holidays on alternate Saturdays, is medical cover.
Although no definitive agreement or insurance underwriter is yet to happen, executives in both banking and insurance industries indicate that underwriting norms could lead to an outgo of about Rs 1,500 crore to Rs 1,700 crore. That will depend on individual bank's negotiating power.
"IBA will float a tender inviting bids from four general insurance companies which will provide cover for all the 10 lakh employees and their family," said Bhasin. The four general insurance companies are New India Assurance, National Insurance Company, Oriental Insurance Company and United India Insurance Company.
If family floater (for four members) scheme per employee is chosen for around Rs 4 lakh annually, it may cost about Rs 5,000 per policy which takes the total premium to Rs 1,600 crore, said an executive at an insurance company who did not want to be identified.
"This move will add good numbers to the medical pool," said a senior official from a large insurance company who did not want to be named. "The premium could be as high as Rs 12,000 for PSU banks employee, given their age demography. But the clamour for winning the mandate could bring down premiums."