Bancassurance is the concept of selling insurance products of insurance companies by banks. It originated in Europe in the 1980s and was successful. The bancassurance business model is a globally accepted profitable business.
Bancassurance is a structured banking product by which banks are enabled to offer diverse range of banking products in addition to products like CASA accounts, FDs, Forex4, etc. It is also a good source of fee-based income to banks.Though banks deal with both life and non-life insurance schemes, the focus remains on offering life insurance schemes to individual customers in retail banking3.
Types of bancassurance products:
Life insurance4 products:
- Term insurance plans( with accident and death benefits).
- Endowment plans
- ULIPs( Unit Linked Insurance Plans)
Non-life Insurance products:
- Health insurance
- Marine insurance( for cargo shipments)
- Property insurance( against natural calamities)
- Key Men insurance( Top executives of companies, partnership firms,etc)
Types of Bancassurance models in India:
1. Pure distributor Model:
In pure distributor, Model bank acts as a distributor of insurance schemes of Insurance company. Example: Indian Overseas Bank acts as a distributor of Life Insurance Corporation of India
2. Strategic alliance Model:
In this model there would be an agreement between the bank and the insurance company to market banca products, other insurance functions are not carried out by the bank. Example: HDFC bank with HDFC life insurance company and HDFC ERGO general insurance company.
3. Joint venture Model:
In a joint venture model a new joint venture company is established in which the bank(s) and the insurance company will have shareholdings in agreed ratio. Example: IndiaFirst Life insurance Co. Ltd is a joint venture between Bank of Baroda (44%), Andhra Bank (30%) and UK's financial and investment company ' Legal and General' (26%).