Advantage And Disadvantage Of Bancassurance

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Bancassurance: Bancassurance or Bank Insurance Model refers to the distribution of the insurance and related financial products by the Banks whose main business is NOT insurance. So, simply Bancassurance, i.e., banc + assurance, refers to banks selling the insurance products. Bancassurance term first appeared in France in 1980, to define the sale of insurance products through banks’ distribution channels. Here, Insurer able to leverage the bank’s infrastructure in regards to source of fee income for banks. Bank and insurer may have a fragmented view of the customers. However it was clarified that any bank intending to take up the business would have to take specific approval from RBI. Advantages for Banks a) It is a source of income for banks. Fee- based income can be increased by selling insurance products to existing bank clients. b) Insurance is a long term contract, so it helps bank to maintain long term relationship with client. Advantages of bancassurance for insured. a) It encourages customers of banks to purchase insurance policies and further helps in building better relationship with the bank. b) The people who are unaware of and/or are not in reach of insurance policies can be benefitted through widely distributed banking networks and better marketing channels of banks. c) Increase in number of providers means increase in competition and hence people can expect better premium rates and better services from bancassurance as compared to traditional insurance

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