Page 13 - Life Insurance Today July - December 2020

customers are clear to you. Let's discuss the reasons why employees and packaging insurance products.
banks are entering bancassurance partnerships, and if they
aren't, why they should be. 6. Specialized Training for Tellers and Branch
Staff
II) Advantages of Bancassurance for Bank staff is often reluctant to take on the responsibility

Banks of selling insurance, in addition to their regular tasks.
This is a major challenge in bancassurance
Banks enter the bancassurance alliances because in most
implementation. Banks address this by taking the
cases, that's the only way they'll be allowed to sell insurance. Insurance Companies' help to devise attractive
This is attractive for the banks because there is a incentive plans & providing them specialized training.
tremendous untapped opportunity for growth globally in
So, banks would be able to keep their employees
insurance.
motivated, while helping them build on their skills.
1. Diversification of Customer Portfolio
Banks already have a relationship with their customers III) Advantages of Bancassurance for
selling them an amalgamation of financial products. Insurance Companies:
With Bancassurance, insurance is added to the mix, Bancassurance forms a very important distribution channel
diversifying the customer portfolio. for insurance companies, with sometimes even 70% of their
premiums originating from it. Clearly the advantages of
2. Improved Profitability & Non-interest Fee bancassurance for the insurance companies are huge. Let's
Income look at them one by one:
In Bancassurance models, banks can easily generate
risk-free income in the form of the commissions from 1. Piggybacking on Banks' High Market
insurance companies. Multiple studies have been done Penetration Rate
in Indian bancassurance context to prove its positive On its own, it would be impossible for insurance
impact on the bank's profitability. companies to reach the market coverage comparable
Banks can cross-sell insurance, with no increase in their to that of banks. Banks have a magnanimous
operational expenses. Banks can leverage their distribution network, especially in India, with lakhs of
distribution and processing capabilities to achieve commercial bank branches. There are 150,947
profitable operating expense ratio. branches spread across urban and rural regions of India
(according to RBI's September 2018 data). So,
3. Customer Loyalty and Retention penetration is the foremost benefit that the insurance
Banks enjoy the benefit of being able to provide yet companies gain out of a bancassurance alliance.
another product to their customers. Providing
2. Increased Premium Turnover
integrated financial services strengthens customer
With increased market penetration, insurers' motive of
relationships and builds better customer loyalty and
retention levels. increasing premium turnover is also achieved using
Bancassurance as the driving force.
4. Increased Customer Lifetime Value There is a clear trend of bancassurance assuming an
With increased loyalty and stickiness, comes higher CLV increasingly high share of distribution. From 33% in FY
per customer which is a very important metric for 2011, has formed higher share of the pie every year to
banks. reach 54% in FY 2018.

5. Cost-effective Use of Existing Resources 3. Customer Trust from Existing Banking
Banks use their existing premises and employees (tellers Relationships
and branch staff) for the sale of the new insurance Banks have already gained trust among their
products. This means that there's no additional cost of customers. Using Bancassurance as the driver, insurance
operation in selling insurance. They also utilize the companies use this confidence to increase their range,
insurance company's expertise in training bank penetration, and premiums.

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