The significance of bancassurance and InsurTech partnerships
NITI Aayog report underscores earlier surveys, revealing a significantly underinsured Indian population. Access barriers, misconceptions associating insurance with affluence, and the undervaluation of insurance needs contribute to this substantial gap. The vast size of the country, the huge rural population, and a traditionally lackadaisical attitude towards financial planning make it very difficult to sell insurance in India.
Moreover, life insurance companies do not have the kind of pan-India presence that could have helped them reach out to the masses directly, but banks do! And they have the added advantage of being trusted by their customers. These factors, and some others, have led to the rise of bancassurance in recent years. Bancassurance blends banking and insurance services under one umbrella.
In such agreements, banks provide insurance products (life or non-life or both) and related services to their customers on behalf of insurance companies. Banks thus act as a distribution channel for insurance products. The New Business under Bancassurance channel reportedly had an overall life insurance (individual plus group) premium of ₹41,096 crore in 2020-21, which increased by 24.5% to ₹51,188 crore in 2021-22.
The bancassurance model has something in it for each stakeholder: customers, banks, and insurers. Banks have, for quite some time now, been helping retail customers with balancing their investment portfolios. Banks are familiar and easily accessible.
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