Bancassurance is a tie-up between a Bank and an Insurance Company that allows an insurance company to sell its products to the client base of the Bank through its distribution network.
The arrangement could be in the form of referral, corporate agency, strategic alliances and joint ventures. Referral model is one where Bank official has to generate the insurance lead from its client base and pass it on to the insurance company for a referral fee. Corporate Agent is much wider version where joints efforts lead to closure of leads, persistency levels to be maintained, commission is payable on renewal premiums and manufacturing exclusive products for Bank clientele. Strategic Alliance is one where Banks buy stake in an existing insurance company besides having tie-up and Joint venture means formation of a new company with investment both from the Bank(s) and the insurance company. Of late, Banking Regulator and the Insurance Regulator have permitted Banks to have maximum of 3 Corporate Agency tie-ups for Life Insurance, General Insurance and Health Insurance businesses, under open architecture.
Benefits to the Insurance Company
* Immediate access to the new markets
* Increase in market penetration
* Reduce reliance on traditional agency channel
* Combine cost savings and increased profitability
* Focus on development of new financial products
* Improve Sales effectiveness and after-sales-service
Consideration for the Banks
* Increase in fee income
* Reduce reliance on interest spreads
* Leverage extensive customer base
* Become one-stop-financial-shop for all financial products
* Reduction in risk weighted capital for same level of revenue
* Provide integrated financial service suiting Life Cycle of Customers
Key Success factors
* Commitment of Partners
* Product Offerings
* Selection of customer segments
* Sales and Distribution Model of the Bank
* Expert Insurance Professionals to support Bank Officials
* Training & Motivation of Bank Officials
Why Bancassurance?
The Investment opportunity lies with the Bank customers as more than 50% of the customer savings rest with the Banks. Remaining financial assets gets distributed in Provident Funds, Pension Funds, Life Insurance Companies, Shares & Debentures and currency notes.
Keep watching this space for interesting updates!
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