Your relationship manager (RM) keeps selling insurance because the bank is an insurer's corporate agent and earns commission on every policy it sells: in FY 2024-25, banks averaged 27% of a life policy's first-year premium, says IRDAI. On a ₹20 lakh FD turned into a five-year "savings plan", the bank's commission comes to about ₹1,56,000.
Why does a bank relationship manager sell insurance?
A bank sells insurance as a corporate agent registered with IRDAI, and the insurer pays it out of your premium. In FY 2024-25, says IRDAI's paper of 23 September 2026, this bancassurance channel brought in about 45% of private life insurers' premium; banks' average new-business commission ran from 5% to 40% across insurers. How insurance commissions work has the rates by product. Mutual funds sold there pay a yearly trail instead: SEBI has barred most upfront commission since October 2018.
For your RM, the pull is the bank's own reward for cross-selling. RBI's rules bar the insurer from paying bank staff a cash or non-cash incentive, yet IRDAI's paper says trips, luxury gifts, milestone bonuses and contest rewards are "currently common across the channel", and proposes banning any volume-linked or reward-linked incentive for bank staff; it is a consultation, not yet a rule.
Rakesh's ₹20 lakh FD and the "savings plan" pitched in its place
Rakesh earns ₹40 lakh CTC, about ₹2,29,100 a month in hand. When his ₹20,00,000 fixed deposit matured in October 2026, his RM offered a savings plan instead of a renewal: a non-participating life policy at ₹4,00,000 a year for five years, with ₹40 lakh of cover and a fixed ₹30,00,000 at the end of year 10. The first premium comes from the maturity; the other ₹16,00,000 waits in a deposit for the next four.
On that first ₹4,00,000, the banks' FY 2024-25 average of 27% is ₹1,08,000. Four renewals at the FY 2024-25 all-seller average of 3% for non-participating plans add ₹48,000: ₹1,56,000 in all, about 7.8% of the ₹20 lakh. Across corporate agents, commission plus rewards on such plans ran from about 29% to 60% of first-year premium in FY 2024-25: ₹1,16,000 to ₹2,40,000 here.
The five-year commitment is the bigger change. Stopping early leaves a reduced paid-up policy, paying a smaller sum at maturity, or, if he surrenders it, a surrender value, usually well below the premiums paid. Policies sold from 1 October 2024 must pay a surrender value once the first policy year is complete and a full year's premium is paid. In FY 2024-25, IRDAI put 61st-month life persistency at 48.4%: about half of policies end before then.
Does the savings plan beat renewing the FD?
At ₹20 lakh CTC or less the FDs come out ahead; at ₹24 lakh and above, the plan does, if every premium is paid. ₹30,00,000 back for ₹20,00,000 paid is about 5.2% a year, tax-free under section 10(10D) of the 1961 Act, because the premium is no more than 10% of the cover and his yearly premiums on such policies stay within ₹5 lakh, the limit for policies issued from 1 April 2023. FD interest is taxed every year. The ₹16,00,000 not yet due earns the same either way, so the table puts the same ₹4,00,000 a year into FDs at 6.5% compounded quarterly (near the top of large banks' 1 to 5 year rates in October 2026, assumed unchanged for ten years).
| CTC | Slab + 4% cess | FDs after tax, year 10 | Savings plan, year 10 | Ahead by |
|---|---|---|---|---|
| ₹20 lakh | 20.8% | ₹30,25,338 | ₹30,00,000 | FDs, ₹25,338 |
| ₹24 lakh | 26% | ₹29,45,663 | ₹30,00,000 | Plan, ₹54,337 |
| ₹40 lakh (Rakesh) | 31.2% | ₹28,67,895 | ₹30,00,000 | Plan, ₹1,32,105 |
The FDs stay reachable. Other plans' terms differ: endowment policy vs term insurance shows the spreadsheet method, and the insurance planning guide sizes life cover separately.
Can you say no without affecting your account?
Yes. Until 31 December 2026, RBI requires a bank's insurance publicity to state that buying is purely voluntary and not linked to any other facility, and a need assessment before it sells a policy with an investment component. IRDAI's corporate agent rules add that a bank tied to several insurers must show you the list of insurers, and its commission scale if you ask, and must not compel a customer taking a loan or other product to buy the insurance through it.
From 1 January 2027, RBI's conduct rules add explicit consent, with "No" as the default on screens; no compulsory bundling with a banking product; the commitment, lock-in and exit penalties disclosed up front; feedback sought within 30 days; and a full refund where insurance mis-selling, which includes an unsuitable sale even with signed consent, is established. IRDAI also proposes treating a non-participating plan sold in place of a deposit, at a lower or comparable return, as mis-selling.
A complaint about the sale goes to the bank in writing. If the bank does not reply within 30 days or the reply is unsatisfactory, the RBI Ombudsman takes it at cms.rbi.org.in under the Integrated Ombudsman Scheme, 2026, within 90 days of the bank's last reply or the 30-day mark, whichever is later. IRDAI's Bima Bharosa system handles complaints about the policy. Five questions on cost help with any product offered at the branch.
Dhi looks at your protection, cash flow, net worth and goals together, and answers questions about a product you are offered from your own numbers. Dhi earns no commission on any product and never mis-sells.
Frequently asked questions
This is general information for salaried individuals in India, not personalised financial advice.
