Deregulation of the insurance sector offers a lot of opportunities for banks to strengthen their fee based income, return on assets and profitability. In some countries of Europe, bancassurance is a great success, where up to 72% of policies are sold by banks. In India, gigantic branch network, strong client data base, the faith of customers on banks etc are some of the factors which could make the bancassurance a success.
Liberalization and deregulation of the financial sector, the greater use of financial engineering techniques and models, significant advances in information technology and consumer demands have all resulted in greater competition and better pricing. As a result, banks started identifying new channels to improve their non-interest income by exploiting convergence in the financial industry and financial liberalization. Bancassurance as an alternative distribution channel was identified as a source of improving the non-interest income of banks. Bancassurance refers to a conglomerate offering both banking and insurance products, usually in the form of a holding structure of separate but interacting entities, an integrated alliance exchanging services or an integrated operational mode. It signifies a long-term relationship to provide a wide range of financial products to a common customer base, by exploiting synergies inherent in collaborating institutions.
Bancassuranceof French originin its purest form refers to a bank issuing insurance policies under its own name and retaining the risk on its books. However, in its broad sense, it can also mean a bank selling insurance products through its own insurance subsidiary/allied company/any other insurer. The latter form is more prevalent in developed countries. The concept is not just a distribution alliance, but signifies a long-term relationship to provide a wider range of financial products to a common customer base, exploiting synergies inherent in the partnering institutions. |
