What is Bancassurance? Bancassurance refers to the marketing of insurance products by Banks. Apart from the regular products they offer in deposits, advances and investments, banks also sell insurance products. This is done to increase their fee-based income and to take advantage of their strengths as financial supermarkets.
Benefits of Bancassurance
- Banks have many advantages over insurance companies. They are able to spread the message about insurance to the masses across a broad cross section of society and increase their business. Banks can market a wide range of insurance products, both in the non-life and life, and make a lot of money by providing this service.
- Banks are perceived to have a closer relationship with the public and better understand their financial needs. People are therefore more responsive to the advice of their Banker.
- Bank employees are comfortable speaking financial terminology and language. They can also learn about insurance to help them sell the products. They are also skilled at numbers crunching and can make a compelling sales pitch, which gives them an advantage.
- Combining insurance and banking products can offer better products to consumers. This allows them to maximize the benefits of both products and services.
- Insurance companies can offer insurance products via the banking channel, which allows them to less depend on agents to sell their products. Insurance companies spend a lot of money to train, motivate, reward, and remunerate agents who promote their products.
- Cross-selling insurance products is mutually beneficial to both the Banks as well as the Insurance companies. Both can benefit from each other’s products and services.
- The commissions and fees that banks receive from their insurance company are an additional source for income. The Banks have suffered from the increased competition for interest-based products. They are now trying to find other sources of income through the provision of services and products that are not banking.
- Both classes and masses are served by banks. This allows insurers to promote relevant products through these channels. Simple products are best for the masses and more complex ones for the class.
Bancassurance’s flip side:
- Both bankers and insurers are not happy with Bancassurance. Both are concerned about several issues.
- Losing business to Insurers in relation to similar products is one of the most pressing issues for Bankers. A basic product such as a fixed deposit can be considered a disadvantage when compared to an insurance product that provides both growth and insurance coverage.
- Insurance companies have their own views of Bankers and their marketing strategies. They feel that Bankers are often not doing enough to promote their products.
- Banks believe that Bancassurance is more profitable for them than insurance because they don’t have to spend on infrastructure or manpower. However, Banks do not feel the return from this business is worth the effort.
- Banks may be trying to reduce costs by offering more services offsite. It is not feasible to service insurance clients onsite, which only increases their costs.
- Customers can also lash out at banks for not following up on claims settlements, or other poor service.
- Bankers might not be able to appreciate the finer points of insurance products that they sell and may face legal and administrative hassles from customers.
These are the issues that Bancassurance faces from both the perspective of the Insurers and Bankers. How well the parties involved, I.e. The success of this service depends on how well the bankers and insurers work together to solve their problems and move forward with making money without compromising each other’s.
