Axis Bank has signed an agreement with Life Insurance Corporation to distribute policies of the country’s largest life insurer. This is the largest bancassurance partnership after the IRDAI allowed banks to sell policies of more than one company.
What is Bancasssurance?
Bancassurance is an arrangement in which a bank and an insurance company form a partnership so that the insurance company can sell its products to the bank’s client base.
This partnership arrangement can be profitable for both companies. Banks can earn additional revenue by selling the insurance products, while insurance companies are able to expand their customer bases without having to expand their sales forces or pay commissions to insurance agents or brokers.
Bancassurane also known as Banking Insurance Model (BIM) allows the insurance company to maintain smaller direct sales teams as their products are sold through the bank to bank customers by bank staff and employees as well.
Bank staff and tellers, rather than an insurance salesperson, become the point of sale and point of contact for the customer. Bank staff are advised and supported by the insurance company through product information, marketing campaigns and sales training.
The bank and the insurance company share the commission. Insurance policies are processed and administered by the insurance company.
This partnership arrangement can be profitable for both companies. Banks can earn additional revenue by selling the insurance products, while insurance companies are able to expand their customer base without having to expand their sales forces or pay commissions to insurance agents or brokers.
Bancassurance, the sale of insurance and pensions products through a bank, has proved to be an effective distribution channel in a number of countries in Europe, Latin America, Asia and Australia.
LIC- AXIS Bank tie up for Insurance cover Extension:-
- As on June 30, 2016, Axis Bank had a network of 3,006 domestic branches and extension counters situated in 1,882 centres and this is one of the largest bancassurance partnerships after the recent Insurance Regulatory and Development Authority of India (IRDAI) regulations issued on open architecture framework for banks.
- The partnership with LIC would enable the bank to further expand its existing bouquet of offerings and put forth a compelling proposition for its customers. Apart from LIC, Axis Bank also has a tie-up with Max Life Insurance in the life insurance space. In the initial phase, Axis Bank branches in West Bengal, Bengaluru and Panchkula in Haryana will start selling LIC products.
- Banks have increased their role in Insurance distribution with ‘bancassurance’ being the biggest contributor. Over the last five years the Life Insurance business at Axis Bank has grown at a CAGR of over 25%. The partnership with LIC would enable it to further expand the existing insurance establishment.
- It is noted that Axis Bank already had a distribution arrangement with Max Life Insurance where it also hold a small stake. Max Life however is set to merge with HDFC Life Insurance which has the same parent as HDFC Bank. It is not clear whether Axis Bank will sign a fresh agreement with HDFC Life post merger.
♦ Name – Life Insurance Corporation of India
♦ Establishment – 1956
♦ HQ – Mumbai
♦ Owner – GOI (Govt. of India).