What is Bancassurance? Understand clearly to have a more correct view

Bancassurance is a potential insurance distribution channel that brings huge revenue to insurance businesses and banks. Join DNSE to learn about Bancassurance through the article below.

What is bancassurance?

Learn about Bancassurance

Bancassurance is a French term, combining banking (banca) and insurance (assurance). This term describes the activity of distributing life insurance through banks.

When an insurance company signs an insurance distribution cooperation contract with a bank, the bank will distribute insurance products as well as a number of other services through its branch system and existing customer sources. .

The nature and characteristics of Bancassurance

The cooperation between banks and insurance companies is based on a mutually beneficial agreement:

• Insurance buyers will have new reputable distribution channels, providing products and services to more customers.
• The bank also has additional revenue from brokerage fees and commissions on each insurance product sold.

Forms of Bancassurance

• Distribution agreement: The bank signs a product distribution agreement with the insurance company. At this time, the bank will act as a sales representative or insurance broker for the insurance company.
• Strategic alliance: Banks and insurance companies hold shares in each other.
• Joint venture: A bank and an insurance company jointly establish a new insurance company to do business together
• Insurance company belonging to a bank: The bank acquires all or part of the insurance company.
• In addition, banks can also establish and operate an insurance company themselves.

Benefits of Bancassurance

For banks

• Diversifying business activities: The bank’s current products are “simply” aimed at increasing and protecting customers’ money. Insurance products are a new “breeze” that helps customers receive mental and health protection.
• Increase revenue: The bank will receive a commission on each insurance product sold. The bank’s customer network is very large. Therefore, if this commission is successfully distributed, it will contribute greatly to the bank’s revenue.
• Strengthen loyalty: Insurance products often have longer terms than savings products or loans at banks. Therefore, when distributing insurance products, banks have the opportunity to increase attachment with customers.

For insurance companies

• Minimize costs: Insurance businesses take advantage of the bank’s existing network to sell products without having to build human resources and a massive branch system.
• Increase market share: The huge customer network has been clearly “classified” by the bank, for example: regular customers, loyal customers, VIP customers, Diamond customers, etc. Therefore, this is a good opportunity for businesses insurance to distribute the “right” product to the “right” customer base.
• Enhance brand: The bank is a reputable financial institution. When cooperating with banks and insurance businesses, they will improve brand recognition and image. Especially when cooperating with famous banks in the market.

For customers

• Peace of mind: Insurance products are distributed with solid support from the bank. In addition, customers are also taken care of by bank staff and insurance staff.
• Save time: When there is a need for a transaction or an insurance issue, customers only need to go to the bank to solve both.
• Cost savings: Taking advantage of the existing network of banks, insurance companies do not have to spend too much money to build new distribution channels. Therefore, customers have the opportunity to participate in “cheap” products.

Note when participating in Bancassurance

To maximize the benefits of buying insurance at the bank, customers need to note the following to avoid “losing money”:

• Understand the product “clearly” before participating

Previously, there were many cases where customers only used bank services (credit, savings, etc.) but were “offered” about insurance services by transaction staff.

And in fact, customers are only advised with “vague” information about insurance.

This surprised many customers. Because after paying the money, I realized that I had participated in investment-linked insurance, instead of depositing money and being given insurance like what the consultant advised.

Accidentally participating in this type puts customers at risk of losing the entire initial amount because the insurance company will require customers to pay money for many years.

Therefore, customers themselves need to carefully check information before participating in any product related to insurance businesses and banks.

Four main notes when participating in Bancassurance

• Insurance is for protection, not for profitable investment

The operating principle of insurance is to compensate for the few by the many. Insurance businesses will collect the fees paid by the majority of customers into an insurance fund.

When unfortunate customers have problems, insurance companies will use this money to compensate for risks.

Therefore, you need to understand that the main goal of insurance is to financially protect yourself and your family against unexpected events, not to invest in increasing assets.

• Consider financial capacity

To decide which insurance product to join, you need to have an overview and honest view of your current situation and needs based on income, age, occupation, etc.

It is recommended that a reasonable insurance premium should only account for about 10 – 15% of your total income. The minimum participation period is 5 years to ensure financial compensation if you encounter risks of accident, illness, etc.

In addition, while researching insurance at the bank, don’t forget to talk to the consultant to be introduced to suitable insurance solutions.

• Choose a reputable insurance company

Choose a reputable insurance company that declares information clearly and transparently. In addition, you also need to carefully read all terms in the insurance contract and take note of the procedures and processes for resolving insurance benefits.

Clearly presenting and explaining the terms and benefits of insurance products will ensure you make a “wise” choice that suits your needs and avoid being denied benefits when risks occur.

Through this article, we hope that readers will have a more correct view of insurance in general and Bancassurance in particular. Remember to research carefully and choose an insurance product that suits your financial capabilities.