Bancassurance: an Emerging concept in India
Banks have already changed a great deal over a past few years. The bank which was once content to collect deposits and lend money to companies in profit now also wants to lend u as well. Loans for car, home and education in domestic and foreign universities have already been launched. Services like Demat account and mutual funds are being launched by various banks to increase customer base and enhance profit. But the latest addition to these services is insurance offered by banks. This is popularly known as Bancassurance.Bancassurance is a French term made up of combination two terms Bank and Insurance. The term connotes selling of the insurance through the banks as channels. The wide spread of the banks and with branches reaching almost every section of the society, banks are seen as the viable and economic source of selling insurance products. In India Bancassurance is deepening it roots. It has become a major route for mass selling of different insurance products.
A seamless service of banking, life and non life insurance products is the concept behind Bancassurance. Banks with over 65000 branches and over 65% household investments are the backbone of the Indian financial markets. The data suggests that there are 75 branches after every million inhabitants/ this much coverage is nearly impossible for any company. But the practical application of this concept has given rise to new opportunities and challenges. Various factors like the nature of the people involved, political and social environment has major role to play in Bancassurance business.
Banks and insurance companies view Bancassurance differently. For banks it's a mean of diversification and some add o income. The bank on the other hand sees it as a source of widening customer base and better geographical coverage. The customer sees Bancassurance as a bonanza in terms of reduced price, high quality product and delivery at doorsteps. Actually, everybody can be a winner here.RESONS BEHIND EMERGENCE OF BANCASSURANCE IN INDIA
Banks with their wider coverage and already a good customer mass provides a readymade platform to insurance companies. This help in saving expenses and time of the company. Regulations requiring certain proportions of sales to the rural and social sectors give an added impetus to the drive for Bancassurance. Selling insurance through traditional methods to various sectors may be expensive and more of a head ache. A good tie up with some bank gives a better access to rural markets and makes the whole process efficient.
Banks in India are facing marginal decline in their core lending business . So this Bancassurance provides them an alternative source of some profit .the selling of insurance within the banks lead to the development of sales culture in the banks. This helps bank in improving its own sale of financial products. In addition many banks have taken equity stakes in insurance companiesSWOT ANALYSIS REPORT:
With 1 billion people, sky is the limit for personal lines insurance products. About 200millio households are waiting to be approached for insurance. Millions travelling overseas can be offered with travel and med claim insurance. The biggest pool of skilled professionals is in India. They can be approached while venturing a project on Bancassurance.Weakness:
The biggest hurdle is the IT culture which is missing from almost all the banks .some banks do not even have a LAN when this world has started using WAN and VAN. Managers are not provided with internet connections. The largest segment is of middleclass which is already overburdened with taxes and inflation. Only LIC offers tax exemption schemes. Lastly, the insurance products cant not be tailored to meet the needs of the customer which is necessity in today's world.Opportunities:
The database maintained by banks has to be dissected to churn out different groups and then developing the products according to their needs. This may give rise to Mergers and acquisitions in different companies.
The investors in the capital may turn their face off in case the rate of return on capital falls short of the existing rate of return on capital. Since banks and insurance companies have major portion of their income coming from the investments, the return from Bancassurance must at least match those returns. Also if the unholy alliances are allowed to take place there will be fierce competition in the market resulting in lower prices and the Bancassurance venture may never break-even.CONCLUSION:
The Bancassurance has been a success in most of the countries where It has been applied. The start was indeed slow but with time it has changed the face of the banks. It has given rise to Universal banking system. Despite f the fact that it's a new concept, customers are showing brilliant response. This shows that after a few years the banks are going to deal big in insurance.
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