The relationship between a bank and an insurance company that is targeted at giving an insurance products or insurance benefits to the bank's customers is called bancassurance.In this type of partnership, banks staff and tellers become the point of sale and point of contact for the customer.Bank staff are properly given orientation and gains support by the insurance company through wholesale product information, marketing campaigns and sales training.

The insurance company and the bank shares the commission.Insurance policies are arranged and propagated by the insurance company.Both companies benefit immensely from this agreements.

Banks seldom earn additional revenue by selling the insurance products, while insurance companies are able to increase their customer reach without having to increase in their sales forces or pay commissions to insurance agents or brokers.Bancassurance is proven to be an effective distribution channel in a number of countries in Europe, Latin America, Asia and Australia.Bancassurance can also be referred as Bank Insurance Model (BIM) or allfinanz.

Basically banks make their money by lending money at higher rates than the cost of the money they borrow.More-so, banks collect interest on loans and interest payments from the debt securities they own, and pay interest on deposits, CD's, and short-term borrowings. In India ,banks offer their clients the option to buy a  health insurance policy.

But only through their associated insurance company partners.Health Insurance companies offers a specialized health cover to the customers of a bank, adding benefits and a little  premium.That is to say that banks offers their customers insurance plans.

-------------------------------------------------------------------------------------------------------------------------- Discussing the Advantages of Bancassurance Advantages to Banks Productivity of the employees increases.By providing customers with both the services under one roof, they can improve overall customer satisfaction resulting in higher customer retention levels.Increase in return on assets by building fee income through the sale of insurance products.

(Minimum investment and “No” risks) Can leverage on face-to-face contacts and awareness about the financial conditions of customers to sell insurance products.Generation of additional profits.Staff will be motivated through financial and other incentives.

The “Tough” effective and efficient sales and marketing culture will have a favorable impact on the banks marketing function.Retention of “existing” and acquisition of “new” customers.Certain life insurance products will protect or minimize their risk exposure – mortgage or other loans, key man etc.

Ability to sell bank products to life insurer’s clients.Advantages to Insurers Generation of additional sales.Increase in profits.

Additional funds for investment.Ability to sell bank products to client base – generating additional profits.Sales force will be motivated through additional income and ability to offer more products to their clients and prospects.

Retention of “Existing” and acquisition of “New” customers.The “Good” culture of the bank will have a favorable impact on the life insurer.Insurers can exploit the banks’ wide network of branches for distribution of products.

The penetration of banks’ branches into the rural areas can be utilized to sell products in those areas.Customer database like customers’ financial standing, spending habits, investment and purchase capability can be used to customize products and sell accordingly.This channel allows an insurer to effectively tap the rural sector.

Selling insurance through traditional methods in rural area is an expensive proposition.Since banks have already established relationship with customers, conversion ratio of leads to sales is likely to be high.Further service aspect can also be tackled easily.

Advantages to Consumers Comprehensive financial advisory services under one roof.i.e., insurance services along with other financial services such as banking, mutual funds, personal loans etc.Enhanced convenience on the part of the insured.

Easy access for claims, as customers visit banks regularly.Innovative and better product ranges.The Various Models of Bancassurance Different Bancassurance business models as given below are prevalent in different countries: Distribution agreements: In simplest form called ‘tied agent’, the bank’s personnel sell the products of one insurer exclusively, either in stand-alone basis or bundled with bank products.

Strategic alliance: This is a higher degree of intervention in product development, service provision and channel management by way of bank investing sizable in insurance business without any contingent liability.Joint venture: Here a large bank with a well developed customer database partners with a large insurer with strong product and channel experience, to develop a powerful new distribution model.Alternatively, a bank and insurance company may agree to have cross holdings between them to share the profits.

Financial service group: Under further integration between a bank and insurer, an insurance company may build/buy a bank or a bank may build/buy an insurance company.Thus banks could associate themselves with insurance companies by becoming a distributor or by being a strategic investor or developing a joint venture or by becoming a promoter.Most of the bancassurance operations fall in the first model.

-------------------------------------------------------------------------------------------------------------------------- Courtesy: MBAKNOL Where to get bancassurance policy? Vera Financial - Vera Financial dac is an Irish company held by Gruppo Cattolica specialized in Class III life insurance products, offered using the freedom of services regime in various countries of the European Union.The life products offered by Vera Financial dac are structured and personalized in such a way as to satisfy the needs of the customers.For more interaction on bancassurance use the comment box below.Please also like and share our posts and pages.

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