Open architecture in bancassurance

What is open architecture in bancassurance?

Open architecture is a distribution arrangement in which a bank or other distributor offers products from several insurers rather than from a single partner. A customer at the branch can, in principle, choose between two or more life insurers, general insurers or health insurers. The opposite is closed architecture, where a distributor sells only one insurer's products in a line, as individual insurance agents in India do.

In India the term usually refers to banks and other corporate agents. It also describes IMFs, which can tie up with several insurers, and brokers, which have no limit at all.

How open architecture works in India

IRDAI moved from a limit of three insurers per line for corporate agents to nine in 2022, and from two to six for IMFs. Every corporate agent applicant must have a board-approved open architecture policy, and each tie-up must be disclosed to IRDAI and last at least one year.

Open architecture is permission, not obligation. A bank with a group or joint venture insurer may still route most business to that partner, while adding other insurers for products their partner does not offer or for particular customer segments.

The 2026 proposal

IRDAI's September 2026 consultation paper, "Recalibrating Economics of Insurance Distribution", would extend open architecture as an option to every distribution entity under a single Insurance Distribution Entity licence, with no limit on the number of insurers, subject to having enough trained sellers. Agents and insurer associates would stay closed architecture.

The paper ties commission to architecture: entities eligible for open architecture would get lower commission caps than closed architecture agents. As summarised by Khaitan and Co, the paper's own data found that single tie-up bank arrangements had an average total payout of 13% of new business premium, against 33% for multiple tie-up arrangements. The law firm noted that caps are linked to eligibility for open architecture, not to whether an entity actually uses it. These are proposals, with comments due by 25 October 2026.

What open architecture means for distribution

• Insurers compete for the branch, not just the bank. With several partners on the shelf, the branch employee decides which product to discuss. Insurers that place sales managers in branches, train staff and keep issuance fast are better placed to win that conversation.
• More partners can mean more payout competition. Multiple tie-ups give the bank negotiating power. IRDAI's data on higher payouts for multiple tie-ups is one reason for the proposed caps.
• Customer choice needs a real process. Open architecture helps the customer only if the seller compares options on need, not on which partner is running a contest. Product comparison tools and suitability records support genuine choice.
• Operations multiply. Each extra insurer means more product training, more integrations, more MIS and more claims contacts for the bank. Banks may therefore limit active partners to those that justify the operational effort.
• Partner concentration risk falls. For an insurer, being one of several partners in many banks spreads risk compared with depending on one large bank. For a bank, multiple partners reduce dependence on one insurer's products and service.
• Bundling controls still apply. Whatever the number of partners, insurance cannot be made a condition of a loan. The RBI's conduct directions effective 1 January 2027 add explicit, product-wise consent requirements for banks and NBFCs.

Open vs closed architecture