; Bancassurance Meaning  The Bank Insurance Model BIM also
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Bancassurance Meaning  The Bank Insurance Model BIM also

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 The Bank Insurance Model (BIM), also sometimes
 known as Bancassurance, is the term used to describe
 the partnership or relationship between a bank and an
 insurance company whereby the insurance company
 uses the bank sales channel in order to sell insurance
 BIM allows the insurance company to maintain
  smaller direct sales teams as their products are
  sold through the bank to bank customers by
  bank staff.

 Bank staff and tellers, rather than an insurance
 salesperson, become the point of sale/point of
 contact for the customer. Bank staff are advised
 and supported by the insurance company
 through product information, marketing
 campaigns and sales training.
 In Other words,
The Bancassurance is the distribution of
 insurance products through the bank's
 distribution channels. It is a phenomenon
 where in insurance products are offered
 through the distribution channels of the
 banking services along with a complete range
 of banking & investment products & services.
 In simple term we can say Bancassurance tries
 to exploit synergies between both the
 insurance companies & banks.
Bancassurance in India:

• Bancassurance in India is a very new concept,
 but if past gaining ground. In our country the
 banking & insurance sectors are regulated by
 two different entries. They are: -

 * Banking is fully governed by RBI &
 * Insurance sector is by IRDA
Guidelines given by RBI
 1. Any commercial bank will be allowed to undertake
 insurance business as the agent of insurance companies
 & this will be on fee basis with no-risk participation

 2. The second guideline given by the RBI is that the joint
 ventures will be allowed for financial strong banks
 wishing to undertake insurance business with risk

 3. The third guideline is for banks which are not eligible
 for this joint venture option, an investment option of
 (1) up to 10% of the net worth of the bank or
 (2) Rs. 50 crores. Whichever is lower is available.
Guidelines given by IRDA
 1) Chief Insurance Executive: Each bank that sells
 insurance must have a chief Insurance Executive to
 handle all the insurance matters & activities.

 2) Mandatory Training: All the people involved in selling
 the insurance should under-go mandatory training at an
 institute determined (authorized) by IRDA & pass the
 examination conducted by the authority.

 3) Corporate agents: Commercial banks, including co-
 operative banks and RRBs may become corporate agents
 for one insurance company.
 4) Banks cannot become insurance brokers
 LIC: The insurance company LIC of India have tie up with
  the following bank for Bancassurance. They are: -

  (A) Corporation Bank
  (B) Indian Overseas Bank
  (C) Centurion Bank
  (D) Sahara District Central Co-operative bank
  (E) Janta Urban Co-operative bank
  (F) Yeotmal Mahila Sahakari Bank
  (G) Vijaya Bank &
  (H) Oriental Bank of Commerce
 Issues to be keep in mind while
 (1) Do not depend upon traditional Method:

For example: - a complex unit-linked life insurance
  product is better sold through brokers & agents, while
  a standard term product or simple products like auto
  Insurance, home loan and accident Insurance cover
  can be handled by bank branches.
(2) Clarity on operational activities :

There is need to be clarify on the operational activities of
 Bancassurance that :-

  (a) Who will do branding?
  (b) Will the Insurance Company prefer to place a person
  at the branch of the bank? Or
  (c) Will the bank branch train and keep its own people?
  (d) Who will pay remuneration of above-mentioned
  people bank or Insurance Company or both in some
(3) Required Good Training:

Even though the banks are in personal contact with its
  client, a high degree of active marketing skill is
  required to sell the insurance products. These can be
  possible through proper training only.
Advantages of Banassurance:
Bancassurance is a tool, which is beneficial to

 bank,
 customer &
 Insurer
(E) For the banks, income from bancassurance is the
    only non interest based income. Interest is market
    driven and fluctuating and quite narrowing these
    days. Banks do not get great margins because of the
    competition This is why more and more banks are
    getting into bancassurance so as to improve their
(F) Increased competition also makes it difficult for
    banks to retain their customers. Banassurance comes
    as a help in this direction also.
(G) Providing multiple services at one place to the
    customers means enhanced customer satisfaction
From the banks point of view:
(A) By selling the insurance product by their own channel
    the banker can increase their income.
(B) Banks have face-to-face contract with their customers.
    They can directly ask them to take a policy. And the
    banks need not to go any where for customers.
(C) The Bankers have extensive experience in marketing.
    They can easily attract customers & non-customers
    because the customer & non-customers also bank on
(D) Banks are using different value added services life-E.
    Banking tele banking, direct mail & so on they can also
    use all the above-mentioned facility for Bankassurance
    purpose with customers & non-customers.
From the Insurer Point of view

    The Insurance Company can increase their business
     through the banking distribution channels because
     the banks have so many customers.

    By cutting cost Insurers can serve better to customers
     in terms lower premium rate and better risk coverage
     through product diversification.
 The insurance company gets improved geographical
 reach without additional costs. In India around 67,000
 branches are there for PSU banks alone. If all 67,000
 branches sell the insurance products one can see the
 reach. This is one method of penetrating the market.

 There is also another method called 'Bank Referral'.
 Here the banks do not issue the policies, they only give
 the database to the insurance companies. The
 companies issue the policies and pay the commission
 to them. That is called referral basis.
From the customers' point of view:

 Product innovation and distribution activities are
 directed towards the satisfaction of needs of the

 Bancassurance model assists customers in terms of
 reduction price, diversified product quality in time
 and at their doorstep service by banks.
 Over the past three years, around 40 companies have expressed
  interest in entering the sector and many foreign and Indian
  companies have arranged anticipatory alliances. The threat of
  new players taking over the market has been overplayed. As is
  witnessed in other countries where liberalization took place in
  recent years we can safely conclude that nationalized players will
  continue to hold strong market share positions, but there will be
  enough business for new entrants to be profitable.
 Opening up the sector will certainly mean new products, better
  packaging and improved customer service. Both new and
  existing players will have to explore new distribution and
  marketing channels. Potential buyers for most of this insurance
  lie in the middle class. New insurers must segment the market
  carefully to arrive at appropriate products and pricing.
  Recognizing the potential, in the past three years, the
  nationalized insurers have already begun to target niches like
  pensions, women or children.

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