Dhanlaxmi Bank, DHFL Pramerica tie up for bancassurance
DHFL Pramerica Life Insurance Company has signed on Kerala-based Dhanlaxmi Bank as its bancassurance partner, under which the latter will distribute retail and group life insurance products to its customers across 260 branches in India.
The bank stands to get quite a large amount of income from the distribution of the products. This is going to be the focus area for the bank this year.
With this tie-up, the company is in a strong position to consolidate its presence in Kerala, Tamil Nadu, Andhra Pradesh and Karnataka.
What is ‘Bancassurance’?
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.
Need for bancassurance in India:-
- The need and subsequent development of bancassurance in India began for the following reasons:
- To improve the channels through which insurance policies are sold/marketed so as to make them reach the hands of common man.
- To widen the area of working of banking sector having a network that is spread widely in every part of the nation.
- To improve the services of insurance by creating a competitive atmosphere among private insurance companies in the market.
Regulations under RBI and IRDA:-
The Reserve Bank of India and the insurance development and regulatory authority have a set of guidelines for companies that couple to form bancassurance. Based on the equity a bank should hold in joint venture, the highest allowable value of equity, the type of banks and insurance companies that can couple together and the operation of bancassurance are all the factors that are regulated by RBI and IRDA.
Benefits of Bancassurance:-
- It encourages customers of banks to purchase insurance policies and further helps in building better relationship with the bank.
- The people who are unaware of and/or are not in reach of insurance policies can be benefitted through widely distributed banking networks and better marketing channels of banks.
- Increase in number of providers means increase in competition and hence people can expect better premium rates and better services from bancassurance as compared to traditional insurance companies.
Demerits of bancassurance:-
- Data management of an individual customer’s identity and contact details may result in the insurance company utilizing the details to market their products, thus compromising on data security.
- There is a possibility of conflict of interest between the other products of bank and insurance policies (like money back policy). This could confuse the customer regarding where he has to invest.
- Better approach and services provided by banks to customer is a hope rather than a fact. This is because many banks in India are known for their bad customer service and this fact turns worse when they are responsible to sell insurance products. Work nature to market insurance products require submissive attitude, which is a point that has to be worked on by many banks in India.
* SBI life insurance Company
* LIC is tied up with Vijaya bank, Oriental bank of commerce, Corporation bank
* ICICI Lombard
* Barclays – MetLife India
* Axis bank – MetLife India