Bancassurance..

Content:1. Introduction

2. Bancassurance Policy and Types

3. Need of Bancassurance in India

4. Merits and Demerits of Bancassurance

5. Bancassurance regulation under RBI and IRDA

6. Different Bancassurance Companies

7. Conclusion

The bank insurance model (BIM), also sometimes known as Bancassurance or allfinanz, is the partnership or relationship between a bank and an insurance company, or a single integrated organization, whereby the insurance company uses the bank sales channel in order to sell insurance products, an arrangement in which a bank and an insurance company form a partnership so that the insurance company can sell its products to the bank's client base.

Introduction

Types of Bancassurance:

TYPE TARGET SELLING PRODUCT TYPE

INSURANCE PRODUCT TYPE

Life Insurance Body of the insured

Mortality life Insurance, Endowment Insurance

Insurance product type

Indemnity Insurance

Property of the insured

Property, Interest, responsibility, guarantee.

Car, fire, vessel, credit assurance, travel, leisure etc.

Bancassurance Policy:

1. BIM allows the insurance company to maintain smaller direct sales teams as their products are sold through the bank to bank customers by bank staff and employees as well.

2. Bank staff and tellers, rather than an insurance salesperson, become the point of sale and point of contact for the customer.

3. Bank staff are advised and supported by the insurance company through product information, marketing campaigns and sales training.

4. The bank and the insurance company share the commission. Insurance policies are processed and administered by the insurance company.

5. This partnership arrangement can be profitable for both companies. Banks can earn additional revenue by selling the insurance products, while insurance companies are able to expand their customer base without having to expand their sales forces or pay commissions to insurance agents or brokers.

Cont…

Need for Bancassurance in India:-

To improve the channels through which insurance policies are sold/marketed so as to make them reach the hands of common man.

To widen the area of working of banking sector having a network that is spread widely in every part of the nation.

To improve the services of insurance by creating a competitive atmosphere among private insurance companies in the market

.

Merits DemeritsIt encourages customers of banks

to purchase insurance policies and further helps in building better relationship with the bank.

The people who are unaware of and/or are not in reach of insurance policies can be benefitted through widely distributed banking networks and better marketing channels of banks.

Data management of an individual customer’s identity and contact details may result in the insurance company utilizing the details to market their products, thus compromising on data security.

There is a possibility of conflict of interest between the other products of bank and insurance policies (like money back policy). This could confuse the customer regarding where he has to invest.

Regulations under RBI and IRDA:-

The Reserve Bank of India and the insurance development and regulatory authority have a set of guidelines for companies that couple to form Bancassurance. Based on the equity a bank should hold in joint venture, the highest allowable value of equity, the type of banks and insurance companies that can couple together and the operation of Bancassurance are all the factors that are regulated by RBI and IRDA.

The IRDA has very recently drafted guidelines to promote open architecture in Bancassurance. Currently a bank has a tie-up with only one life insurer and one non-life insurer. But in the new model the banks necessarily have to have multiple tie-ups. The country is divided into zones and every bank has to choose multiple insurers within the zones. With this the customer will have a wider range of insurance products offered by different insurers. It will also lead to a deeper penetration in the selling of insurance products. 

Bancassurance companies:-

SBI life insurance Company

LIC is tied up with Vijaya bank,

Oriental bank of commerce,

Corporation bank

ICICI Lombard

Barclays – MetLife India

Axis bank – MetLife India

Conclusion:

Bancassurance is an efficient distribution channel with higher productivity and lower costs than traditional distribution channels. These cost advantages are particularly significant in the more integrated models