Bancassurance in detail

Bancassurance refers to a partnership between the banks & insurance company wherein the bank sells the tied insurance company’s insurance products to its clients.

This partnership arrangement is profitable for both the parties. The insurance company benefits from increased sales from a broader client base without the need of paying commission to agents & the bank benefits from improved customer satisfaction & increased revenue from sale of insurance products.

In this way, the bank acts as an intermediary, helping insurance firms reach its target customer in order to increase its market share.


The main features of this arrangement are as below –

  1. Bank cannot pay a premium on behalf of the customer.
  2. Only two insurance companies can be used in one bank.
  3. It ensures the availability of all the financial services under one roof.
  4. All commissions are disclosed in the annual accounts report.


Various models used by banks are as :-

  1. STRATEGIC ALLIANCE MODEL – Under this Model, there is a tie-up between a bank and an insurance company. The bank only markets the products of the insurance company. Except for marketing the products, no other insurance functions are carried out by the bank.
  2. PURE DISTRIBUTOR MODEL –  In this model, the bank offers a product of insurance companies. They offer more than one company’s product. For that, insurance companies pay commission to the bank like management fees, etc.
  3. JOINT VENTURE MODEL – In this model, a large bank with a well developed customer database partners with a large insurer with strong product and channel experience, to develop a powerful new distribution model.
  4. FINANCIAL SERVICE GROUP – In this, all the facilities of financial activities are under one roof.


  • By providing customers with both the services under one roof, they can improve overall customer satisfaction resulting in higher customer retention levels.
  • Insurance companies look to Bancassurance as a cost-effective mode of distribution.
  • Certain life insurance products will protect or minimize their risk exposure – mortgage or other loans, key man etc.
  • Opportunities for sophisticated product offerings.


Thus, in simple words,  Bancassurance is the provision of insurance  (assurance) products by a bank which is beneficial for both bank as well as the insurance companies & ensures the provision of all the financial facilities under one roof.

Accounting & Finance for Banking

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