Bank insurance services or also called as bancassurance, refers to the partnership formed between the bank and the insurance company. The agreement allows the insurance company to offer and sell its products and services to the bank’s clients. This type of partnership is equally profitable for both parties. Every time the bank makes a sale, they share the commission with the insurance company. The bank gains additional profit from a sale while the insurance company earns without having to hire extra manpower. It’s practically a win-win situation. The bank teller becomes the point person instead of an insurance agent when it comes to dealing with the customer. The insurance agency provides continuous support to the staff by providing them with product training and promotional materials. There are some insurance agencies that still use brokers aside from the bank.
In some countries, the practice of bancassurance is proven to be effective in their specific market. However in other parts of the world, bank insurance services are not permitted by the government.
How it Works
In bancassurance, the premium is received by the bank through automatic debit from the customer’s bank account. The payment process between the bank and insurance company is already automated. Life insurance policies are incorporated to the bank’s products and services. However, there are some restrictions when it comes to selling life insurance with regards to the bank staff. Most investment based policies can be handled only by accredited financial advisors. In effect, banks have expanded their workforce to authorized financial advisors to sell their products exclusively.
A private bancassurance is another classification that follows the same practice. It refers to a combination of private banking and investment management that is followed by many banks and insurance companies. This method is developed to provide protection for business owners and investors. There are different business models that are practiced by several banks and insurance services. One is where the bancassurance is incorporated to the business of the bank. Another is where the bank uses financial advisors to sell the products to the clients. Both methods affect the business structure between the bank and insurance agency. Choosing which business model to follow will depend on the restrictions such as qualifications of the sales person, type of insurance product or agreement between the bank and insurance company. Bank insurance services provide several advantages such as providing financial stability, protection from financial damages, supporting the banking industry and economic growth.
Purchasing an insurance policy from the bank has its advantages. You get the convenience of dealing with one company instead of talking to different organizations. This saves the headache of entertaining different people. Oftentimes, you get to hit two birds with one stone by doing your bank errands and insurance transactions in one go. When making a decision whether to purchase an insurance policy, it is better to seek help from financial advisors. Ask them to explain to you the coverage and benefits of your policy. Before you decide on getting one, check the different insurance companies and bank institutions that offer insurance policies. Compare the premium, costs, terms and process and pick the best one that you feel is most suitable for you.