Bancassurance Meaning Types What Is Bancassurance

Bancassurance Meaning

Explanation

Bancassurance is nothing but selling life insurance products via banks. Banks and life insurance companies come together to do business in partnership. It is useful for both the banks and insurance companies because here, the bank sells the product of insurance companies to their clients, and the bank also offers bank products to those insurance clients.

The insurance company offers a policy to the client in which customers have to pay premium payments every year. Insurance companies will give you a lump-sum payment, known as a death benefit. It is one of the securities in which the owner buys this product as security. So if any accidental death happens in the future, this product will help the owner’s family because the family gets lump-sum cash.

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Importance

In bancassurance, banks can easily earn profits without doing any risky work. Banks need to sell insurance company products, and in return, the bank will get a commission. Banks will get more benefits by offering life insurance products because they will get a chance to build good relationships with customers. In addition, life Insurance companies will organize specialized training for bank employees, which is an added benefit for the bank.

Features

Banks cannot pay a premium on behalf of the customer.It can use only two insurance companies in one bank.All commissions are disclosed in the annual accounts report.A bank always focuses on its banking business.For an insurance company, a bank’s network is useful for the sale.Do due to periodic assessment.Bancassurance improves profitabilityProfitabilityProfitability refers to a company’s ability to generate revenue and maximize profit above its expenditure and operational costs. It is measured using specific ratios such as gross profit margin, EBITDA, and net profit margin. It aids investors in analyzing the company’s performance.read more.It increases customer lifetime value.It can offer all the financial facilities under one roof.

Types of Bancassurance

There are two types:

#1 – Life Insurance Products

Term insurance plansEndowment plansUnit linked insurance plans.

#2 – Non-Life Insurance Products

Health insuranceMarine insuranceProperty insuranceKey man insurance

Bancassurance Models

Pure Distributor Model – In this model, the bank offers a product of insurance companies. They offer more than one company’s product. Insurance companies pay commissions to the bank like management fees, etc.Strategic Alliance Model – In this model, there is a linkup between the insurance company and the bank. Bank will offer only those products which the insurance company wants to sell.Joint Venture Model – The bank participates in product and distribution design in this model. There is joint decision-making and high system integration for infrastructure utilization.Financial Service Group – In this, all the facilities of financial activities are under one roof.

Benefits

Bancassurance provides a complete financial solution by considering all the customer’s needs and by studying all the requirements they want.There is no issue with trust because customers buy products from a bank and have their existing relationship with the bank.It offers all the facilities like mutual fundsMutual FundsA mutual fund is a professionally managed investment product in which a pool of money from a group of investors is invested across assets such as equities, bonds, etcread more, loans, accounting, etc., with insurance products under one roof, making it more convenient for the customer.Bank has the professional expertise to give proper advice to buy which product by studying their background. Bancassurance requires less time for the process because the bank already has access to their data and documentation.It offers both services under one roof, so it is easy for a customer to access. It will improve overall customer satisfaction so both insurance companies and the bank will profit and customer satisfaction.Staff from both the companies will get more incentives thus will get motivation for their work, and as a result, staff will give better service to the customer, and because of that, new customers also come and join.It is useful both ways, like a bank gives clients to life insurance companies, so it is profitable for them. In return, it is beneficial for banks also because they sell banks’ products to the insurance clients so that the bank also gets profit.It contains both bank and insurance company work so the requirements of employees will increase. It is more beneficial for insurance companies to work with banks because banks are available in some rural areas, so the marketing of insurance products will be easier.The main advantage for the customers is that a customized insurance product at a reduced price because it cuts the operational cost, and experts are also available for guidance. It is helpful for increased premium turnover also.

Drawbacks

The initial investment for bancassurance is more, and it also requires more employees.It is useful for selling a few products only.They need to arrange training for those who will handle these processes because of a lack of vision and awareness.

Conclusion

As we see all the advantages and disadvantages, we can say that it is a good idea to combine both bank and Life Insurance companies as it is beneficial for both. It is also good for customers because bancassurance offers all the facilities under one roof.

Staff from banks also get more incentives and can become more productive. It is easy for life insurance companies to get clients’ data from a bank because of which time required for data collection is reduced. It is a two-way business because a bank can sell the insurance company’s products and offer bank products to the insurance clients.

For that level of insurance expertise, they will take training sessions so that all the bank employees will get ideas or knowledge about it.