Bancassurance means selling insurance through banks. Banks and insurance companies collaborate in a partnership, where the bank sells the partner insurance company’s products to its customers.
Banks and insurance companies collaborate to form a partnership in which the bank sells the insurance firm’s products to its customers. This arrangement of selling an insurance product through banks is known as Bancassurance.
This arrangement profits both the bank and the insurance company, as the bank earns a commission amount from the insurance company while the insurance firm broadens its market share and customers. The bank acts as a mediator by helping an insurance firm reach its target customers to increase its market reach.
Importance of Bancassurance
The importance of Bancassurance are listed as follows:
Bancassurance is a relatively new idea in the financial sector. The belief behind Bancassurance is to combine the marketing capabilities and selling-culture of insurance companies with the distribution network and sizeable customer base of banks. In this arrangement, insurance products are traded through the broad distribution sections of the banking services accompanied by a comprehensive range of banking and investment products. In short, Bancassurance has a tremendous chance, if appropriately implemented, to be a win-win situation for banks, insurers and the customer.
BANCASSURANCE MODELS
Bancassurance in India
In India, the first three models are practised, but the laws do not permit either banks or insurers to own an insurance company or bank wholly.
The insurance sector in India is expanding rapidly. Both banks and insurance companies perceive bancassurance as an opportunity to increase the Indian financial industry’s future income and footprint. Non-life insurance products are featured to a lesser extent as compared to life insurance products. The banks have a customer base of more than 100 million and therefore are in a perfect situation for taking bancassurance forward.
Bancassurance in India is gaining ground extremely fast despite being a very new concept. In India, the banking sector is under the control of Reserve Bank of India and insurance sector is managed by the Insurance Regulatory and Development Authority (IRDA). Since Bancassurance contains constituents from both industries, it comes under the influence of both regulators. Each of the regulators (RBI and IRDA) have given out comprehensive regulations for the bank’s involvement in the insurance sector.
This degree of possible fee-based revenue creation by banks in India from bancassurance is the temptation for banks to get involved in the space.
However, many customers are also bypassing the bancassurance channel and purchasing insurance online directly through self-service channels. Aegon Life is one of the pioneers for the online channel of distributing life insurance in India. A fantastic term insurance plan that you can purchase online is the Aegon Life iTerm Plus Insurance Plan which also offers a term Plan with cover for 36 Critical Illnesses.
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