Bancassurance has gained a lot of importance over the past few years, the reason being the opening up of insurance sector and the raised FDI (foreign direct investment) cap by the Government of India. Bancassurance has attracted banks, the simple reason being that the banks could cover banking as well as insurance function.
Bancassurance is a tie-up between a bank and an insurance company to sell insurance products. This provides an advantage to bank and to insurance companies who can earn fee-based income by selling risky products like insurance schemes and the insurance companies can increase their market penetration by accessing bank’s customer database.
Nowadays, banks are adopting bancassurance model to increase their market share and cover a large number of customers by providing them banking as well as insurance products. Since there is an enormous potential for insurance in India, it is assumed that bancassurance model can play a key role in providing better services to customers. There is enormous potential for insurance in India and recent experience has shown massive growth pace. The paper will unleash various factors of low market penetration of insurance and growth avenues of bancassurance in India.