Though much commotion was made about bancassurance, an alternate channel to hawk risk products through banks, the channel is yet to pick up rapidity as of today. Most of the insurance companies have already coupled up with banks to explore the potential of the channel that has been a success story in Europe and legislations are also in place. For insurance companies and banks the convergence brings about benefits for both but then what’s stopping it from taking off in a big way?
Bancassurance primarily banks on the relationship the customer has developed over a period of time with the bank. And pushing risk products through banks is a cost-effective matter for an insurance company compared to the agent route, while, for banks, considering the falling interest rates, fee based income coming in at a minimum cost is more than welcome SBI Life Insurance Company a predominant player in bancassurance is optimistic about the channel bringing about a transformation in the way insurance has been sold so far. The company is banking heavily on bancassurance and plans to discover the potential of State Bank of India’s 9000 plus branches spread across the country and also its 4000 plus associate banks - one of the reasons why SBI Life Insurance is not laying much emphasis on increasing its agent force from the present 3000.
Various models are used by banks for bancassurance. One is the insurance salesman of the respective company being posted in the bank, the other is where a select group of wealth management people of the bank sell insurance and the third is where the bank employees are incentivized to hawk insurance products.
Insurers are no doubt optimistic about the channel but it does come with a few limitations. While sale of insurance comes at a lower cost through this channel in comparison to the agency route and the insurance company gains much through the large bank network spread across the country the potential can be impeded if bank officials do not actively generate leads.
Also it is yet to be seen how far buying shelf space in a bank helps push sale of insurance. Besides the target audience is limited to those individuals who visit the bank during the working hours. And with technology changing at a rapid pace ATMs and internet banking have been reducing the individual’s visits to the bank which could perhaps be a dampener for bancassurance.
Insurance companies are positive about the bancassurance channel raking in volume business at a low cost and banks have been salivating over the fee-based income that it will bring. But unless products are simple, easy to understand and easy to market much of the benefits the bancassurance channel holds, may remain only on paper.
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