INTRODUCTION AND DESIGN OF THE STUDY
The business of banking around the globe is changing due to integration of global financial markets, development of new techniques, universalization of banking operations and diversification in non-banking activities. Due to all these movements, the boundaries that have kept various financial services separate from each other have vanished. The coming together of different financial services has provided synergies in operation and development of new concepts. One of these is bancassurance.
Bancassurance – a term coined by combining the two words ‘bank’ and ‘insurance” (in French) connotes distribution of insurance products through banking channels. It refers to a tie-up arrangement of a bank with insurance companies for selling insurance products in life and non-life segments as corporate agents for fee based income. This income is risk free as the bank plays the role of an intermediary for securing business to insurance company. Bancassurance is a package of banking and insurance services under one roof.
Bancassurance in its simplest form is the distribution of insurance products through a bank distribution channel. In concrete term, bancassurance which is also known as ‘Allfinanz’ (in German) – distributes a package of financial services that can fulfill both banking and insurance needs at the same time. It takes various forms in various countries depending upon demography, economic and legislative climate of that country. Profile of a country decides the kinds of products bancassurance shall be dealing with. Economic situation will determine the trends in terms of turnover, market share etc. The legislative climate will decide the periphery within which the bancassurance has to operate.
The motive behind bancassurance varies: For banks – product diversification and source of additional fee income; for insurance company – a tool of increasing its market penetration and premium turnover; for customers – reduced price, high quality product and delivery at doorsteps. So, actually everybody is the winner.
Meaning and Definition of Bancassurance:
Bancassurance is the distribution of insurance products through the banks’ distribution channel. It is a phenomenon wherein insurance products are offered through the distribution channels of the banking services along with a complete range of banking and investment products and services. In simple terms, we can say bancassurance tries to exploit synergies between both the insurance companies and the banks,
Bancassurance can be an important source of revenue for banks. With the increased competition and squeezing of interest rates, profits are likely to be under pressure. Fee based income can be increased through hawking of risk products like insurance.
Bancassurance if taken in right spirit and implemented properly can be win-win situation for all the participants, viz, banks, insurers and the customers.
Origin of Bancassurance:
Bancassurance has grown in different places in different forms based on the demographic, economic and legislative condition of the country. Across Europe, in countries like Spain and UK, banks started the process of selling life insurance decades ago and the customers found the concept appealing for various reasons.
Germany took the lead and it was called ‘ALLFINANCE.’ The system of bancassurance was well received in Europe, France taking the lead, followed by Germany, UK, Spain, etc. In USA, the practice was late to start (only in 1990s). it is also developing in Canada, Mexico and Australia.
In India, the concept of bancassurance is very new. With the liberalization and deregulation of the insurance industry, bancassurance evolved in India around 2002.
The term bancassurance first appeared in France in 1980 to define the sale of insurance products through banks’ distribution channels. It is most successful in...