Bancassurance Explained: Benefits, Bancassurance Models

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Bancassurance is distribution of insurance products through banks outlet. It is basically selling insurance products and services by leveraging the best customer base of a bank and fulfill the banking and insurance needs of the customers at the same time. Thus it is coalition between the bank and the insurance company.

bancassurance

Bancassurance Benefit for Bank

For banks it is a means of product diversification and a source of additional fee income.

  • Leverage on their extensive customer bases;
  • Sell a whole range of financial services to clients and increase customer retention
  • Reduce risk-based capital requirement for the same level of revenue
  • Work towards the provision of integrated financial services tailored to the life-cycle of customers
  • Access funds that are otherwise kept with life insurers, who sometimes benefit from tax advantages
  • Optimizing the man power utilization in order to increase efficacy in productivity

Bancassurance Benefit for Insurance Company

Insurance companies see Bancassurance as a tool for increasing their market penetration and premium turnover

  • Tap into a huge customer base of banks
  • Reduce their reliance on traditional agents by making use of the various channels owned by banks
  • Share services with banks;
  • Develop new financial products more efficiently in collaboration with their bank partners;
  • Establish market presence rapidly without the need to build up a network of agents;
  • Obtain additional capital from banks to improve their solvency and expand business.
  • Economy in distribution cost

Bancassurance Benefits to customers

  • An amalgamation of financial services under one roof i.e. along with banking facilities such as accounting, loans, mutual funds etc, insurance services are also provided
  • Professional expertise and trained executives are there to give them proper advice.
  • They get risk coverage at bank itself
  • Ease of renewal and other formalities.
  • Easy access for claims

Bancassurance Models

There are various types Bancassurance models:

  • Distribution Agreement: Under this arrangement, the Insurer able to leverage the bank’s infrastructure and provides source of fee income for banks. This is widely used bankassurance model in India. There is low level of integration of product management and distribution channel.
  • Strategic Alliance: In this model also, the Insurer able to leverage the bank’s infrastructure and provides source of fee income for banks. There is sharing of customer database with insurance company. There is low level of integration of product management and distribution channel management.
  • Joint Venture: Under this model, the bank participates in product and distribution design. There is joint decision making and high system integration for infrastructure utilization.
  • Financial Services Group: This is one stop shop for all financial services.

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