Bancassurance

The reforms in the insurance sector leading finally to the opening of the insurance sector for private participation has brought in its wake major changes not only in the design of the products available in the market but also the manner in which they are marketed. We have today a host of products coupled with a large number of intermediaries who market them.

The emergence and spread of bancassurance has been one of the most significant developments in the retail financial services sector in India. Many banking institutions and insurance companies have found bancassurance to be an attractive - and often profitable - complement to their core businesses. While less than two per cent of total premiums are generated through this channel, there are expectations that bancassurance will grow to register a dominant share in the widening insurance market during this decade. World over, while both life and non-life companies seekto engage bank branches, non-life products have featured less prominently in bancassurance distribution. The major reason is the complementary nature of life insurance and banking products. Both are in the nature of savings accumulation, one short-term and the other long-term. The enormous trust that the banks command in the minds of public is an important reason why insurance companies seek to enter into wide ranging banking partnerships. The banks, in turn, find that the customers appreciate the provision of integrated financial services at the bank’s branches which in turn builds better customer loyalty and retention levels. The insurance companies and the banks together find that their collaboration at providing a package of financial services not only benefits customers but also maximizes their profits.

The early bancassurance distribution arrangements in India are taking off under two categories: (a) distribution alliances by way corporate agency and insurance broking relationships,...