Banking & insurance companies have been facing severe rivalry in the market. Along with the tough competitors, banks and insurance companies have also been encountered to emergence of new banks that are not only providing efficient services but also on the way to challenge the leaders thorough their innovative and highly beneficial products and services. Hence banking & insurance companies always try to maximize the value positioning of their services to attract more and more customers. One such attempt is insurance policy offerings by the banks.
Bank usually provides insurance facilities by combining with their own banking products and services. Hence these facilities of banking & insurance companies have been given a unique name of Bancassurance. It is basically the offering of products that are insured by the bank. Along with providing their regular services like taking deposits from customers, allowing withdrawals and providing credit facilities, banks have also been making the availability of insurance based products.
Banks can avail more benefits in comparison to insurance companies by presenting these offerings in the market. Since banks are in direct and close contact with customers, they can be better representatives for making customers aware about insurance policies and their benefits. Both in life and as well as in non-life sector, banks usually market the entire line of insurance based products. In this way they not only informed people about insurance and its importance but they can also earn attractive sum of money.
Since customers rely on their own bank more and its banking services than other financial institutions, people believe that the bank can understand their financial needs, transactions and benefits in a good manner. Hence they get inspired by bank’s recommendation easily. Banks are also good in playing with numbers, and this enables them to convince the customers by showing them an accurate roadmap of calculated benefits of banking and insurance.
Banking & insurance when mixed together, can generate a much better and highly beneficial product mix for the customers .By applying insurance principle, banking products can be turned into much profitable ones both for bank and customer. Also, bank and insurance companies can be a mutual beneficiaries. Since insurance company has to incur higher costs regarding choosing, training ,evaluating and paying to their sales agents, tying up insurance with banking can be nice alternative to reduce this cost. Banks provide a good channel to insurance companies to depend less on their sales agents.
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Banks can get more income in terms of commission and charges from tying both banking and insurance. The contribution of interest based offerings especially , is much significant for the banks. Further, since banks possess thousands of customers and maintain their customers profiles and database, it is easier for them identify the right customers for the right offer. Insurances based products can range from simpler one to highly sophisticated. It is the ability of bank to leverage its resources by attracting more and more customers to its bancassurance offerings.
Tying up banking & insurance is a unique combination through which customers, banks and insurance companies, share several advantages.