NAME: KARAN BELLANI
| PAGE NO
| HISTORY OF BANCASSURANCE
| BANCASSURANCE MODELS
| ADVANTAGES AND DISADVANTAGES OF BANCASSURANCE
| DEUTSCHE BANK TIE UP WITH BIRLA SUN LIFE AND BAJAJ ALLIANZ INSURANCE CO.
The business of banking around the globe is changing due to integration of global financial markets, development of new technologies, 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 operations and development of new concepts. One of these is bancassurance. It simply means selling of insurance products by banks to its customers. In this arrangement, insurance companies and banks undergo a tie-up, thereby allowing banks to sell the insurance products. This is a system in which a bank has a corporate agency with one insurance company to sell its products. By selling insurance policies bank earns a revenue stream apart from their banking business. It is called as fee-based income. This income is purely risk free for the bank since the bank simply plays the role of an intermediary for sourcing business to the insurance company. Bancassurance has grown at different places and taken shapes and forms in different countries depending upon demography, economic and legislative prescriptions in that country. Bancassurance, the sale of life insurance and pensions products through a bank, has proved to be an effective distribution channel in a number of countries. In a broad sense, bancassurance is the distribution of insurance products to a banks client base. However, beyond this definition, bancassurance business models vary widely from country to country.
HISTORY OF BANCASSURANCE
Before the 1970s, insurance policies were traditionally distributed by insurance agents and brokers. This traditional method of distribution was solidly entrenched in UK, Germany and Switzerland. Bancassurance proper first appeared in the 1970s in France, when banks were granted permission to market insurance products. Bancassurance really took off in France in the mid-1980s as a result of a series of reforms, including deregulation of the credit market in 1986 and direct access to the corporate funding market. The leading retail banks then refocused their sales and marketing policies on branch customers and reactivated their dormant insurance businesses. Following on from France, where 60% of life insurance is distributed by the banks, bancassurance spread rapidly through Southern Europe to countries where the insurance penetration rate and the growth rate of the traditional insurance networks of brokers and agents were still low. Bancassurance is a new buzzword in India. It originated in India in the year 2000 when the Government issued notification under Banking Regulation Act which allowed Indian Banks to do insurance distribution. It started picking up after Insurance Regulatory and Development Authority (IRDA) passed a notification in October 2002 on 'Corporate Agency' regulations. As per the concept of Corporate Agency, banks can act as an agent of one life and one non-life insurer. Currently bancassurance accounts for a share of almost 25 to 30% of the premium income amongst the private players in India.
At present in India, the entire bancassurance business models can be classified into two types, on the basis of structural classification and on the basis of product based classification. This can be explained in detail below.
1. ON THE BASIS OF STRUCTURAL CLASSIFICATION
A) REFERRAL MODEL: At the outset banks anticipating not to take risk could adopt “referral model‟ wherein they merely...
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