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Sujai Adithya
Business Development and Banking & Financial Services Expert
Asked a question last year

What does the term 'Bancassurance' mean?

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Sujai Adithya
Business Development and Banking & Financial Services Expert

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%).