The brew of ‘Bank’ and ‘Insurance’ gives rise to ‘Bancassurance’. The increasing competitiveness among the bank and insurance companies over the years has affected the financial statements of both these entities. India, having a lower level of penetration and compactness in insurance industry compared to the banking industry, the Insurance industry was facing problems to sell their products to the consumers due to the fact that they were lacking a strong customer base.
Banking Industry of India has been seeing the largest banking networks. As assured by Mr. Raghuram Rajan, in 2015 after taking over as the Governor of RBI in 2013; the banking industry could look very different five years down the line, from what it is now.
Banking sector has set up their legs in the insurance sector and is using their networks and established distribution channels to sell the various insurance products. In today’s time, the various Life Insurance products and Non-Life Insurance Products are reaching to the common people, in every corner of the nation, very conveniently. This revolution in the Financial sphere were directed with the introduction of Bancassurance
The major reason behind the Bancassurance concept becoming popular is that it is not only benefitting the Economy of the nation but also is fulfilling the individual interests of Customers and the interests of the Insurance and Banking industry as a whole. Where the Banks may be recovered from the problems such as NPA’s (Non Performing Assets), the insurance industry gets a broader customer base through the help of banks. The banks also benefit by earning commission or providing such fee based services and it is also a risk free approach.
To uplift the economic condition of the nation, an intact financial structure was needed to be advanced. This requires an efficient channelization of the financial wherewithals. To develop such concept into reality RBI recognized the need of implementing Bancassurance, which could ensure the reach of the insurance products to even the rural ranges; which could strengthen the banking networks throughout the nation and will also elevate not only the standards but also the services provided by the insurance companies and act as an impetus for them to improve their efficiency.
The guiding regulators to Bancassurance are RBI, Reserve Bank of India and IRDA, Insurance Regulatory and Development Authority. The various regulations proposed by them include: the eligibility criteria for banks to set up joint ventures, conditions approving the involvement of a foreign partner, prior approval from RBI before entering into any agreement, the minimum paid up capital required, various restrictions for the international companies, and other limitations proposed by IRDA.
According to a Foresight market research report generated, looking forward to the prospects of Bancassurance by 2020, Insurance products distributed through banking channels have possibly become a natural choice for the mass market clients who are looking for simple and low cost products available from trusted names in the areas of providers of financial institutions.
Bancassurance could emerge as an acceptable trend in the financial market across the globe, due to the various advantages it possesses: The commissions earned through bancassurance are expected to grow globally which would benefit the banks. The key markets with such growth prospects include Singapore, India, China, Chile, and Turkey, to name a few. In Asia-Pacific, growth will be stimulated by the entry of large foreign insurance players and a favorable macro-economic environment. Apart from commission, the other benefits include a better relationship between customers and banks. Customers become aware about the various insurance products which they were not able to access easily.
The more will be the competition, the more will be the service providers and therein the people can expect better services from such concept of Bancassurance as compared to the traditional insurance companies.
The various Indian companies involved in Bancassurance are; SBI Life Insurance Company, ICICI Lombard, Barclays Met Life, Axis Bank Met Life, ICICI Prudential Life Insurance Co. Ltd, Canara Bank, HSBC, Oriental Bank of Commerce, Vijaya Bank, Corporation Bank, etc.