Introduction to Bancassurance
Bancassurance was first registered in 1860 when CGER Saving Bank of Belgium began to sell mortgage-linked insurance. In 1980, the term Bancassurance was defined as the sale of insurance products through the bank distribution channel.
Bancassurance is the association of banking and insurance facilities. It is basically the idea of selling the insurance products and services by leveraging the huge network of bank. In this, banks acts as corporate agents for insurance company to sell insurance product. This concept started from France and now, has a huge market in Asian regions like Singapore, Taiwan, India, Hong Kong etc.
The Global Bancassurance Market has the market value of US $ 1191 billion in 2020 and has the expected CAGR of 5.98% from 2021-2026, making it a market worth US $ 1696 Billion. It has two product types:
- Life Bancassurance
- Term Insurance Plan
- Endowment Plan
- Unit Linked Insurance Plan
- Non-Life Bancassurance
- Health Insurance
- Marine Insurance
- Property Insurance
Some of the major players in the market includes;
- Banco Bradesco SA
- Barclays Plc
- Citigroup Inc.
- NongHyup Financial Group
- SBI Life Insurance Company
Advantages of Bancassurance
To Banking Institutions
- Diversification of product and customer portfolio
- Improved Profitability and Non-Interest Fee Income
- Customer Loyalty and Retention
- Cost-effective use of existing Resources
- Increased customer lifetime value
- One stop-shop for all financial needs
- Improved application and policy processing time
- Ease of Renewals
- Trust in insurance products and services
- Customized product and expert advice
To Insurance Companies
- High Market Penetration Rate
- Relevant offer generation and customer engagement
- Increased operational efficiency and reduced costs
- High service and product responsiveness
- Increased Premium Turnover
Disadvantages of Bancassurance
- Association and dependence may cause conflict of interest between the partners leading to new operational and performance risk.
- The conflict of interest between bank products and insurance products and their policies could confuse the customers regarding where to make the investment.
- For such synergy to work, it requires intensive planning and monitoring which could a lot to the participating company.
- This requires huge initial investment and trained employees.