BANCASSURANCE

PRESENTED BY - Lidhiya Babu Roll no : 26

BANCASSURANCE

Bancassurance denotes a partnership between a life insurance company and a banking institution.

It was developed in Europe.In Asia, Singapore, Taiwan and Hong

Kong are ahead in Bancassurance , with India and China taking tentative steps towards it.

The need of the insurance company to access a large base of customers and a desire on the part of the bank is to arrange financial products leads to these partnership in different forms.

Some of the key attraction are thrusting relationship with customers, branch name recognition, customers profitability measurement system in bank, cash management relationship with corporations and the fact is that Bancassurance distribution and more cost effective than traditional distribution.

Key issues to the success of Bancassurance

1. Both the bank and insurance company need to improve effectiveness of the sales channels by identifying and gaining access to target customers, adding push to market pull, training of sales staff, differentiating performance from competition and controlling selling cost per unit sold.

2. Product need to be tailored to meet the need of the customer base and for new distribution channels.

3. Communication needs to be streamlined to address any cultural issues between the bank staff and the insurance staff.

4. Traditional processes need to be redesigned not only to take advantage of the new technology, but also to effective a streamlined system between bank and the insurance company. Technology can be used to put effective use in sales support function, staff training etc.

5 Information system needs to be reviewed and performed measurement parameters need to be specially adapted to Bancassurance.

6 Skill needs to be developed an reallocation of asset and resources – financial and human may also be required between the bank and insurance company.

BANCASSURANCE IN INDIA

In India banking and insurance sectors are regulated by two different entities.

The banking sector is governed by Reserve Bank of India (RBI) and the insurance sector is regulated by Insurance Regulatory and Development Authority (IRDA).

Advantages for the insurance company :

Through this new distribution network, the insurance company significantly extends its customer base and enjoys access to customers who were previously difficult to reach.

An insurance company can establish itself more quickly in a new market, using a local bank’s existing network.

Advantages for the banks :

The bank sees bancassurance as a way of creating a new revenue flow and diversifying its business activities.

The bank becomes a sort of “supermarket”, a “one-stop shop” for financial services, where all customers’ needs – whether financial or insurance-related – can be met.

DEMERITS OF BANCASSURANCE

Compromising on data security.

Conflict of interest between the other products of bank and insurance policies.

Better approach and services provided by banks to customer is a hope rather than a fact.

BANCASSURANCE - TYPES

1. Leveraged Life Distribution 2. Leveraged Bank Distribution3. Bank / Life Venture

1. Leveraged Life Distribution

This model of Life insurance company takes the lead in partnership, while several banks act as corporate agents to provide access to middle market leads.

2. Leveraged Bank Distribution

This Leveraged Bank Distribution model, it is the bank that takes the leads as in the partnership, while the life insurance companies supply products for its bancassurance efforts. This models calls for a large bank with a range of effective distribution channels.

3. Bank/Life Joint Venture

The final type of partnership brings a bank with a well developed customer database together with a large life insurer with strong product and channel experience to develop a powerful new distribution model.

In this model of venture the bank provides the lead and its reputation and brand name, while the insurer bring the products and underwriting and servicing expertise. The partners combine their individual expertise to forge a best practice bancassurance operation with tailored products, tailored distribution and lead generation mechanism.

Conclusion:

For banks it just acts as a means of product diversification and additional fee income ;

For insurance company it acts as a tool for increasing their market penetration and premium turnover and

For customer it acts as a bonanza in terms of reduced price, high quality products and delivery to doorsteps. So every body is a winner here.