Bancassurance

Bancassurance : Overview

For any economic sector to grow well, it is the sound financial system that matters the most. But in recent times, the service industry has been facing many changes. Talking of which, the industry of life insurance has progressed on a good note. The pace at which it has progressed has opened the gate for many opportunities. Whether it is the Indian or International finance system, Bancassurance has set a remarkable change. It has dealt with a difficult proposition that made the insurance selling quite challenging. With Bancassurance in India, the manpower and distribution strength has reached out to the customer base to a great extent.

Definition

For those who are wondering what is bancassurance, it is a term made from the blend of two words: a bank and insurance. It focuses on the insurance products distribution using the banking channels. To be precise about Bancassurance meaning, it is the concept of selling the products that insurance companies offer through the bank. Bank, in such a case, works as an agent to promote the Banca product. This promotion is followed as per the Banking Regulation Act, 1949 under section 6(1)(o).

Originated in the year 1980, the concept of Bancassurance earned a tremendous response. It has a different business model, which is now being accepted not just in India but also in the internal finance system.

The need for Bancassurance to Banks and Insurance Companies

Now that you know what bancassurance is, you need to also know how it has been helping banks and insurance companies. Many insurance companies are now insisting on making the insurance products a part of the common man’s life and thus make it the primary financial point. For this, Bancassurance is helpful through the local bank branch. The bank is spread across different countries and can cover maximum customers to sell the insurance products. They work as an agent that requires no distribution channel.

Bancassurance is present in the emerging market. Bancassurance in India has shown a noticeable start. Besides, Bancassurance also states the scale and scope economies have also made quite an attractive alliance for both parties.

Reason for Choosing Bancassurance

Bancassurance is an organised banking product through which the banks can offer a wide range of banking products to their customers along with products such as FDs, CASA and Forex.

Bancassurance in India is one fine source of income that is based on the fee for the banks. The focus of the bank is to offer an insurance scheme to the customer. It is engaged in selling non-life and life insurance schemes through retail banking.

It is one kind of arrangement between the insurance company and the bank. In this, the insurer can sell the product to the bank’s customers.

With the help of Bancassurance, the insurance company can have a better hike in the sales and also, the client base gets broader. It does not need any sales force expansion.

Further, the bank also gets the benefit as it receives additional income from the sale that is made from the insurance products.

Types of bancassurance products

Products of Life insurance

• Endowment plans

• Term insurance plans that offer accident and death benefits).

• Unit Linked Insurance Plans

Products of Non-life Insurance

• Cargo shipments insurance

• Health insurance

• Property insurance against natural calamities

• Insurance for key men such as partnership firms or executives of companies

Types of Bancassurance models

Pure distributor Model: As per the Bancassurance meaning, under this model of pure distributor, there is a model bank that works as an insurance schemes distributor for the insurance company. Indian Overseas Bank is one such fine example that works distributor for the Life Insurance Corporation of India.

Strategic alliance Model

Under this model of Strategic alliance, the insurance company and bank agree on marking the Banca products. In this, there will not be any kind of other insurance fountains that the bank will handle. HDFC Bank is one such fine example that is tied up HDFC life insurance company.

Joint venture Model

In this joint venture model, there will be a new joint venture that will be settled in the bank along with the insurance company. In this insurance company will get shareholdings in a specific ratio. IndiaFirst Life insurance Co. Ltd is one such example that is a Joint venture with Bank of Baroda.

Benefits of Bancassurance

It is not just a singly policy

For any business to have a customer buying policy, a good customer experience is important. Financial products need to offer the same. Bancassurance offers the best value for money assurance through quality products of insurance through customized insurance solutions.

Convenience

Convenience is another reason why customers prefer to go for Bancassurance. Since the insurance product that is being offered to the customers can be customized and at less price, the customer is happy and gets good guidance.

Trust

The customer’s trust is essential, and when it comes to banks, certainly customers trust their respective banks to a great extent. If that specific bank has been selling the right product, the dependency on the agents reduces, and banks can also get a better percentage for selling the insurance products.

Best for all financial requirements

The model of Bancassurance distribution offers customers get an amalgamation of different financial services under one roof. Insurance once was considered to be the missing puzzle piece which now is completed by Bancassurance.

Other than this, the customer gets extra advice from their trustable bank. If they wish to renew the policy, they can do so without hassle.

Conclusion

With the emergence of Bancassurance, the insurance company has managed to reach a maximum number of the audience while banks are earning a good commission. But of all, the customer gets much better protection in different ways. It is one profitable enterprise that is now accepted at the global level for being a profitable sales channel to sell products of insurance through banks.