In its simplest form, bancassurance is the distribution of insurance products through a bank’s distribution network. The term has its genesis in the 1980s in France, where this channel today is a predominant source of insurance business.

Since its inception, bancassurance has experienced explosive growth, and assumed various forms, including cross holding of equity, takeovers and mergers between the partners. The concept truly is not just a distribution alliance, but signifies a long-term relationship to provide a wider range of financial products to a common customer base by exploiting synergies inherent in the partners.

Bancassurance partnerships are a win-win situation for the customer, the bank and the insurer. The customer can avail of integrated financial services under one roof. For the insurer, bancassurance is a low-cost distribution model wherein it can extend reach without setting up exclusive branches. For the banks, it is a source of regular income and an opportunity to offer a complete bouquet of financial services to their customers.

The concept of bancassurance has now taken hold in various parts of the world. In Asia, a growing number of alliances, joint ventures, mergers and acquisitions between banks and insurers indicate the increasing importance of bancassurance. In fact, bancassurance has developed into a distinct distribution model which complements the traditional agency model.

Over the last few years in particular, interest in bancassurance has grown as insurers have sought alternative distribution channels and banks, additional sources of revenue. Aviva is a leading bancassurer with 40 partnerships worldwide. In fact, Aviva introduced bancassurance in Asian countries like India, Sri Lanka and Singapore.

Bancassurance is now recognised as a key growth driver for the Indian life insurance market, especially for the private sector. Indian banks have more than 65,000 branches across the country, with an estimated 16,500 customers per branch. A majority of them continue to visit the bank branch to meet their savings and credit needs. Bancassurance therefore provides an availability of scale to the insurer.

To begin with, it is essential for both parties to understand that bancassurance is a long-term alliance requiring significant upfront investments before returns are realised. As insurers we work closely with banks to understand their account holder profiles when creating specifically targeted policies. These are most often sold only to the bank customers.

Also, bank customers expect a certain level of service and a look-and-feel of service that they have been used to in their interactions with the bank. The insurer must gear up its service infrastructure and effectively integrate its processes and systems with the bank to deliver a similar customer experience.

In India, bancassurance currently generates almost 22-25% of the new business in the private sector. This is a major shift away from the purely agency-sales model prevalent prior to 2002. With an access to a potential customer base of 46.3 million, a presence in close to 500 towns and cities, 65% of Aviva’s new business premium is being generated from this channel.

In bancassurance, strategic alignment and expeditious execution are increasingly being recognised as the key drivers for success. For any insurer to successfully implement a bancassurance model, the understanding of the bank’s business, products, processes and customers is critical. A successful bancassurer understands the bank’s customers, identifies the right product mix and provides ease of purchase and service delivery.

Vivek Khanna, Director-Marketing, Aviva India