Salim Ahmed :
The insurance industry provides risk transfer, savings and investment products to a variety of consumers ranging from individuals to govt. Bancassurance is a process where bank sales the insurance product on behalf of insurance companies through banking channel under specific agreement. In this process bank staff and teller becomepoint of sale and point of contact for insurance customer which is facilitated by insurance company in terms of providing training, product information, sales and marketing etc. Insurance policies are processed and administered by the insurance companies where banks gives account opening, deposit, withdrawal and payment facility at maturity of the respective policy. Bancassurance can cater so many win benefits for all the involved stakeholders – customers, banks and insurance companies.
Advantages for banks
Bancassurance helps banks to diversify its product portfolio and customer base. Say for example when a new customer approach for insurance product, he or she has to open an account with the bank, again when existing customer approach for insurance, a new product can be sold by the bank.Without taking any risk at all, Bank will earn a commission income from insurance companies by selling insurance product which will increase banks profit. When customer gets multi products from a bank they became loyal customer. Moreover insurance normally covers long term future risk so bank can get longtime customer with life time value. Banks use their existing premises and employees for the sale of insurance products. This means that there’s no additional cost of operation in selling insurance which increased Return on Assets (ROA) of banks. To sale more policy, insurance companies generally use agents who has target oriented bonus with minimum base pay, often sales insurance products recklessly to achieve the target bonus without taking proper due diligence on source of money. Launderer takes this chance and placed their illicit money into the economy by buying policy with the help of agents. In Bancassurance not the agent but the permanent employee of the bank will sold the insurance product so bank can ensure full due diligence, enhance due diligence where necessary and can block the access of laundered money into the economy. The money deposited into banks as selling of insurance product will boast the capital of banks and reduce the liquidity crisis, raised capital can be invested in public and private sector which in turn creates employment andincrease purchasing power of the people. Customer of Insurance companies, may turn into banks customer by opening new account, savings product or by taking loan. Customer gives synergy effect being same customer buy banking product as well as insurance product. Hence every single customer gives profit to two companies at a time.
Advantages for Insurance Companies
Insurance company will get country wide market and customer access through banks branch in all over the country which is almost impossible as well as expensive to them. With increased market penetration, the insurance policy sale will be increased which increased the industry income. Insurance companies are able to expand their customer base without having to extend their sales force hence depending on insurance intermediaries or sales agent reduced by decreasing agent commission. In our context, peoples have less confidence on insurance but more confidence on banks. Bancassurance helps to overcome this problem which will turn confusion into confidence. Banks have already gained trust among their customers. Using Bancassurance as the driver, insurance companies use this confidence to increase their range, penetration, and premiums. Banks have a huge amount of data on their customers. This includes their demographic and financial info, transactional information, spending patterns, credit repayment history (investment and purchase capability) and more. The insurance companies and banks can use this information to customize relevant insurance covers.Insurance can use brand value of reputed banks which creates positive images and customer will be confidentto buy insurance products
Advantages for Customers
Customer believes that their banks will sellthe right product to them. The trust they would place on insurance companies and independent agents is comparatively lesser. Therefore, the propensity to buy insurance products from their banks is higher. Customer gets one stop shop for all financial products in a single place. Bank already has the data and documentation of customers. This real-time information accessibility makes sure that the turnaround time is reduced – in application processing, renewal and claims management. This is one of the major advantages of bancassurance for customers.
The global Bancassurance market size reached around $1,166 Billion in 2018 and further projected to reach a value of $1,665 Billion by 2024. It is expanding at a compounded annual growth rate (CAGR) of 6.16% from 2014 to 2019. The growth rate is four times faster than the growth of life insurance in many market and world. Though we are late but have to start it immediately for synergy effect and to achieve financial inclusion of the govt. The Bancassurance policy should cited maximum limit of investment in each insurance product in single and joint name like sanchayapatra demarcation, mandatory AML reporting to BFIU through bank including source of fund questioning and required documents supporting in it, maximum cash threshold for purchasing policy, mandatory use of bank check after the threshold, mandatory E-TIN and national ID . Banks should act as focal point to check the illegal money placement through insurance by CDD, EDD, CTR and STR reporting with respective authority. By tagging National ID with insurance govt. can develop a central database for effective and efficient monitoring and controlling of the sector too.
The insurance industry provides risk transfer, savings and investment products to a variety of consumers ranging from individuals to govt. Bancassurance is a process where bank sales the insurance product on behalf of insurance companies through banking channel under specific agreement. In this process bank staff and teller becomepoint of sale and point of contact for insurance customer which is facilitated by insurance company in terms of providing training, product information, sales and marketing etc. Insurance policies are processed and administered by the insurance companies where banks gives account opening, deposit, withdrawal and payment facility at maturity of the respective policy. Bancassurance can cater so many win benefits for all the involved stakeholders – customers, banks and insurance companies.
Advantages for banks
Bancassurance helps banks to diversify its product portfolio and customer base. Say for example when a new customer approach for insurance product, he or she has to open an account with the bank, again when existing customer approach for insurance, a new product can be sold by the bank.Without taking any risk at all, Bank will earn a commission income from insurance companies by selling insurance product which will increase banks profit. When customer gets multi products from a bank they became loyal customer. Moreover insurance normally covers long term future risk so bank can get longtime customer with life time value. Banks use their existing premises and employees for the sale of insurance products. This means that there’s no additional cost of operation in selling insurance which increased Return on Assets (ROA) of banks. To sale more policy, insurance companies generally use agents who has target oriented bonus with minimum base pay, often sales insurance products recklessly to achieve the target bonus without taking proper due diligence on source of money. Launderer takes this chance and placed their illicit money into the economy by buying policy with the help of agents. In Bancassurance not the agent but the permanent employee of the bank will sold the insurance product so bank can ensure full due diligence, enhance due diligence where necessary and can block the access of laundered money into the economy. The money deposited into banks as selling of insurance product will boast the capital of banks and reduce the liquidity crisis, raised capital can be invested in public and private sector which in turn creates employment andincrease purchasing power of the people. Customer of Insurance companies, may turn into banks customer by opening new account, savings product or by taking loan. Customer gives synergy effect being same customer buy banking product as well as insurance product. Hence every single customer gives profit to two companies at a time.
Advantages for Insurance Companies
Insurance company will get country wide market and customer access through banks branch in all over the country which is almost impossible as well as expensive to them. With increased market penetration, the insurance policy sale will be increased which increased the industry income. Insurance companies are able to expand their customer base without having to extend their sales force hence depending on insurance intermediaries or sales agent reduced by decreasing agent commission. In our context, peoples have less confidence on insurance but more confidence on banks. Bancassurance helps to overcome this problem which will turn confusion into confidence. Banks have already gained trust among their customers. Using Bancassurance as the driver, insurance companies use this confidence to increase their range, penetration, and premiums. Banks have a huge amount of data on their customers. This includes their demographic and financial info, transactional information, spending patterns, credit repayment history (investment and purchase capability) and more. The insurance companies and banks can use this information to customize relevant insurance covers.Insurance can use brand value of reputed banks which creates positive images and customer will be confidentto buy insurance products
Advantages for Customers
Customer believes that their banks will sellthe right product to them. The trust they would place on insurance companies and independent agents is comparatively lesser. Therefore, the propensity to buy insurance products from their banks is higher. Customer gets one stop shop for all financial products in a single place. Bank already has the data and documentation of customers. This real-time information accessibility makes sure that the turnaround time is reduced – in application processing, renewal and claims management. This is one of the major advantages of bancassurance for customers.
The global Bancassurance market size reached around $1,166 Billion in 2018 and further projected to reach a value of $1,665 Billion by 2024. It is expanding at a compounded annual growth rate (CAGR) of 6.16% from 2014 to 2019. The growth rate is four times faster than the growth of life insurance in many market and world. Though we are late but have to start it immediately for synergy effect and to achieve financial inclusion of the govt. The Bancassurance policy should cited maximum limit of investment in each insurance product in single and joint name like sanchayapatra demarcation, mandatory AML reporting to BFIU through bank including source of fund questioning and required documents supporting in it, maximum cash threshold for purchasing policy, mandatory use of bank check after the threshold, mandatory E-TIN and national ID . Banks should act as focal point to check the illegal money placement through insurance by CDD, EDD, CTR and STR reporting with respective authority. By tagging National ID with insurance govt. can develop a central database for effective and efficient monitoring and controlling of the sector too.
(Salim Ahmed, Banker, Trade, AML, Blockchain and Fintech Enthusiast. [email protected])
