Article

Bancassurance
September 14 , 2012

Banks are insurance companies' best friends and the term bancassurance has been coined to indicate the setup of selling of insurance products via banks. Banks are obviously poised to be good point-of-sales of insurance products since they serve a huge customer base and are acquainted with their savings pattern, financial standing and needs.  

Insurers in India have been excited about bancassurance. For insurance companies tying up with a bank lowers distribution costs tremendously and widens their geographical reach After opening up of the insurance sector and entry of private players in 2000 insurers have viewed banks as effective ways of growth and recovery of their start-up expense costs. For banks this arrangement not only brings in additional revenues as commissions but it might also help build a sales culture within themselves that will aid in further promoting banking products and services.

According to current IRDA regulations a bank can tie up with just one life insurer, one non-life insurer and standalone health insurer, for promoting its products. Hence a bank agent may not be the right person to provide good advice on a customer's insurance need, the reason being obvious.

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