2. The Bancassurance is a phenomenon
where in insurance products are offered
through the distribution channels of the
banking services along with a complete
range of banking & investment products
& services. In simple term, we can say It is
a relationship/tie-up between a Bank and
an Insurance company. Bank sells the
products of the Insurance company to
their own customers and earn some
amount of commission on sales.
3. Consideration for Insurers…
Immediate access to New
Markets
Increase in Market
Penetration
Reduce reliance on
traditional distribution
channel
Combine Cost Saving &
Increased Profitability
Develop new financial
products more efficiently
Improve sales
effectiveness & after sales
service
Insurer
5. Bancassurance in India:
Bancassurance in India is a new concept. In our
country the banking & insurance sectors are
regulated by two different entries. They are: -
* Banking is fully governed by RBI &
* Insurance sector is by IRDA
6. Guidelines given by RBI
1. Any commercial bank will be allowed to undertake
insurance business as the agent of insurance companies
& this will be on fee basis with no-risk participation
2. The second guideline given by the RBI is that the joint
ventures will be allowed for financial strong banks
wishing to undertake insurance business with risk
participation.
3. The third guideline is for banks which are not eligible
for this joint venture option, an investment option of
(1) up to 10% of the net worth of the bank or
(2) Rs. 50 crores. Whichever is lower is available.
7. Guidelines given by IRDA
1) Each bank that sells insurance must have a chief
Insurance Executive to handle all the insurance
matters & activities.
2) All the people involved in selling the insurance
should under-go mandatory training at an institute
determined (authorized) by IRDA & pass the
examination conducted by the authority.
3) Commercial banks, including co-operative banks
and RRBs may become corporate agents for one
insurance company.
4) Banks cannot become insurance brokers
9. Fr From the banks view:
(A) By selling the insurance product by their own channel the
banker can increase their income.
(B) Banks have face-to-face contact with their customers. They can
directly ask them to take a policy. And the banks need not to
go any where for customers.
(C) The Bankers have extensive experience in marketing. They can
easily attract customers & non-customers because the
customer & non-customers also bank on banks.
(D) Banks are using different value added services like-E- Banking
tele banking, direct mail & so on they can also use all the
above-mentioned facility for Bankassurance purpose with
customers & non-customers.
10. (E) Increased competition also makes it difficult for banks to
retain their customers. Banassurance comes as a help in this
direction also.
(F) Providing multiple services at one place to the customers
means enhanced customer satisfaction
11. From the Insurer Point of view
• The Insurance Company can increase their
business through the banking distribution
channels because the banks have so many
customers.
• By cutting cost Insurers can serve better to
customers in terms lower premium rate and
better risk coverage through product
diversification.
12. • The insurance company gets improved
geographical reach without additional costs. In
India around 67,000 branches are there for PSU
banks alone. If all 67,000 branches sell the
insurance products one can see the reach. This is
one method of penetrating the market.
• There is also another method called 'Bank
Referral'. Here the banks do not issue the
policies, they only give the database to the
insurance companies. The companies issue the
policies and pay the commission to them. That is
called referral basis.
13. From the customers' point of
view:
• Product innovation and distribution activities are
directed towards the satisfaction of needs of the
customer.
• Bancassurance model assists customers in terms
of reduction price, diversified product quality in
time and at their doorstep service by banks.
