What is bancassurance?
Bancassurance is a collaboration between the bank and the insurance company. The bank provides its platform or clientele to the insurance company to sell its product within its distribution channel. Banks, in return, charge the fee or earn referrals depending on the total premium collected through the bank’s client database or platform.
Bancassurance in India
Bancassurance is a term that describes the distribution of insurance products through banking channels. Banks get income from this distribution. The practice started in India in 2000. IRDA issued a regulation on the registration of Indian companies. The government of India also issued a Notification specifying ‘Insurance’ as a permissible form of business that banks could undertake under Section 6(1)(o) of the Banking Regulation Act, 1949. However, it was clarified that any bank intending to take up the business would have to take specific approval from RBI. All scheduled commercial banks were allowed to do insurance business as agents of insurance companies on a fee basis, without any risk participation. Specific rules were made for setting up joint venture companies for doing insurance business with risk participation. The practice has been growing ever since. Traditionally, insurance products were sold only through individual agents, and they accounted for a major chunk of the business in the retail segment. With the opening up of this sector to private players, competition has become more intense, and the public sector major LIC has been challenged with a flood of new products and new means of marketing. The insurance industry in India has been advancing at a fast pace since the opening up of the sector to the entry of private companies in 2000