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Ravali Bhogaraju 2013H149287P
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What is Bancassurance?
Bancassurance is a French term referring to the selling of insurance through a bank's established
distribution channels. In other words, we can say Bancassurance is the provision of
insurance (assurance) products by a bank. The usage of the word picked up as banks and insurance
companies merged and banks sought to provide insurance, especially in markets that have been
liberalised recently. It is a controversial idea, and many feel it gives banks too great a control over the
financial industry. In some countries, bancassurance is still largely prohibited, but it was recently
legalized in countries like USA when the Glass Steagall Act was repealed after the passage of the
Gramm Leach Bililey Act.
Bancassurance is the selling of insurance and banking products through the same channel, most
commonly through bank branches. Selling insurance means distribution of insurance and other
financial products through Banks. Bancassurance concept originated in France and soon became a
success story even in other countries of Europe. In India a number of insurers have already tied up
with banks and some banks have already flagged off bancassurance through select products.
Bancassurance has become significant. Banks are now a major distribution channel for insurers, and
insurance sales a significant source of profits for banks. The latter partly being because banks can
often sell insurance at better prices (i.e., higher premiums) than many other channels, and they have
low costs as they use the infrastructure (branches and systems) that they use for banking.
Bancassurance primarily rests on the relationship the customer has developed over a period of time
with the bank. And pushing risk products through banks is a much more cost-effective affair for an
insurance company compared to the agent route, while, for banks, considering the falling interest
rates, fee based income coming in at a minimum cost is more than welcome.

How is Bancassurance different from classic or Traditional Insurance Model?
BIM differs from classic or Traditional Insurance Model (TIM) in that TIM insurance companies
tend to have larger insurance sales teams and generally work with brokers and third party agents.
An additional approach, the hybrid insurance model (HIM), is a mix between BIM and TIM. HIM
insurance companies may have a sales force, may use brokers and agents and may have a partnership
with a bank.
BIM is extremely popular in European countries such as Spain, France and Austria.
The use of the term picked up as banks and insurance companies merged and banks sought to provide
insurance, especially in markets that have been liberalised recently. It is a controversial idea, and
many feel it gives banks too great a control over the financial industry or creates too much
competition with existing insurers.
In some countries, bank insurance is still largely prohibited, but it was recently legalized in countries
such as the when the GlassSteagall Act was repealed after the passage. But revenues have been
modest and flat in recent years, and most insurance sales in U.S. banks are for mortgage insurance,
life insurance or property insurance related to loans. But China recently allowed banks to buy insurers
and vice versa, stimulating the bancassurance product, and some major global insurers in China have
seen the bancassurance product greatly expand sales to individuals across several product lines.
Privatbancassurance is a wealth management process pioneered by Lombard International Assurance
and now used globally. The concept combines private banking and investment management services
with the sophisticated date use of life assurance as a financial planning structure to achieve fiscal
advantages and security for wealthy investors and their families. The banks are the agent of the
insurance companies to sell them more and more policies. Bancassurance is an efficient distribution
channel with higher productivity and lower costs than traditional distribution channel.

Advantages of Bancassurance:
The following factors have mainly led to success of bancassurance
(i) Pressure on banks' profit margins. Bancassurance offers another area of profitability to banks with
little or no capital outlay. A small capital outlay in turn means a high return on equity.
(ii) A desire to provide one-stop customer service. Today, convenience is a major issue in managing a
person's day to day activities. A bank, which is able to market insurance products, has a competitive
edge over its competitors. It can provide complete financial planning services to its customers under
one roof.
(iii) Opportunities for sophisticated product offerings.
(iv)Opportunities for greater customer lifecycle management.
(v) Diversify and grow revenue base from existing relationships.
(vi)Diversify risks by tapping another area of profitability.
(vii) The realisation that insurance is a necessary consumer need. Banks can use their large base of
existing customers to sell insurance products.
(viii) Bank aims to increase percentage of non-interest fee income
(ix) Cost effective use of premises
Various Models for Bancassurance
Various models are used by banks for bancassurance. (a) Strategic Alliance Model : Under this
Model, there is a tie-up between a bank and an insurance company. The bank only markets the
products ofthe insurance company. Except for marketing the products, no other insurance functions
are carried out by the bank. (b) Full I ntegration Model : This model entails a full integration of
banking and insurance services. The bank sells the insurance products under its brand acting as a
provider of financial solutions matching customer needs. Bank controls sales and insurer service
levels including approach to claims. Under such an arrangement the Bank has an additional core
activity almost similar to that of an insurance company. (c) Mixed Models: Under this Model, the
marketing is done by the insurer's staff and the bank is responsible for generating leads only. In other
words, the database of the bank is sold to the insurance company. The approach requires very little
technical investment.

Status of Bancassurance in India

Reserve Bank of India (RBI) has recognized "bancassurance" wherein banks are allowed to provide
physical infrastructure within their select branch premises to insurance companies for selling their
insurance products to the banks customers with adequate disclosure and transparency, and in turn
earn referral fees on the basis of premium collected. This would utilize the resources in the banking
sector in a more profitable manner.
Bancassurance can be important source of revenue. With the increased competition and squeezing of
interest rates spreads profit of the banks are likely to be under pressure. Fee based income can be
increased through hawking of risk products like insurance.
There is enormous potential for insurance in India and recent experience has shown massive growth
pace. A combination of the socio-economic factors are likely to make the insurance business the
biggest and the fastest growing segment of the financial services industry in India.
However, before taking the plunge in to this new field, banks as insurers need to work hard on
chalking out strategies to sell risk products especially in an emerging competitive market. However,
future is bright for bancassurance. Banks in India have all the right ingredients to make
Bancassurance a success story. They have large branch network, huge customer base, enjoy customer
confidence and have experience in selling non-banking products. If properly implemented, India
could take leadership position in bancassurance all over the world
Government of India Notification dated August 3, 2000, specified Insurance as a permissible form
of business that could be undertaken by banks under Section 6(1)(o) of the Banking Regulation Act,
1949. Then onwards, banks are allowed to enter the insurance business as per the guidelines and after
obtaining prior approval of Reserve Bank of India.

Entry of banks into Insurance business - insurance agency business/referral arrangement
The banks need not obtain prior approval of the RBI for engaging in insurance agency business or
referral arrangement without any risk participation, subject to the following conditions:
The bank should comply with the IRDA regulations for acting as composite corporate agent or
referral arrangement with insurance companies.
The bank should not adopt any restrictive practice of forcing its customers to go in only for a
particular insurance company in respect of assets financed by the bank. The customers should be
allowed to exercise their own choice.
The bank desirous of entering into referral arrangement, besides complying with IRDA regulations,
should also enter into an agreement with the insurance company concerned for allowing use of its
premises and making use of the existing infrastructure of the bank. The agreement should be for a
period not exceeding three years at the first instance and the bank should have the discretion to
renegotiate the terms depending on its satisfaction with the service or replace it by another agreement
after the initial period. Thereafter, the bank will be free to sign a longer term contract with the
approval of its Board in the case of a private sector bank and with the approval of Government of
India in respect of a public sector bank.
As the participation by a banks customer in insurance products is purely on a voluntary basis, it
should be stated in all publicity material distributed by the bank in a prominent way. There should be
no linkage either direct or indirect between the provision of banking services offered by the bank to
its customers and use of the insurance products.
The risks, if any, involved in insurance agency/referral arrangement should not get transferred to the
business of the bank.
Guidelines for Banks for Entry of banks into Insurance business
1. Scheduled commercial bank would be permitted to undertake insurance business as agent of
insurance companies on fee basis, without any risk participation. The subsidiaries of banks will
also be allowed to undertake distribution of insurance product on agency basis.
2. Banks which satisfy the eligibility criteria given below will be permitted to set up a joint
venture company for undertaking insurance business with risk participation, subject to
safeguards. The maximum equity contribution such a bank can hold in the joint venture company will
normally be 50 per cent of the paid-up capital of the insurance company. On a selective basis the
Reserve Bank of India may permit a higher equity contribution by a promoter bank initially, pending
divestment of equity within the prescribed period (see Note 1 below). The eligibility criteria for joint
venture participant are as under:-
(a) The net worth of the bank should not be less than Rs.500 crore;
(b) The CRAR of the bank should not be less than 10 per cent;
(c) The level of non-performing assets should be reasonable;
(d) The bank should have net profit for the last three consecutive years;
(e) The track record of the performance of the subsidiaries, if any, of the concerned bank should be

3. In cases where a foreign partner contributes 26 per cent of the equity with the approval of Insurance
Regulatory and Development Authority/Foreign Investment Promotion Board, more than one public
sector bank or private sector bank may be allowed to participate in the equity of the insurance
joint venture. As such participants will also assume insurance risk, only those banks which satisfy
the criteria given in paragraph 2 above, would be eligible.

4. A subsidiary of a bank or of another bank will not normally be allowed to join the insurance
company on risk participation basis. Subsidiaries would include bank subsidiaries undertaking
merchant banking, securities, mutual fund, leasing finance, housing finance business, etc.

5. Banks which are not eligible as joint venture participant as above, can make investments up
to 10% of the networth of the bank or Rs.50 crore, whichever is lower, in the insurance company
for providing infrastructure and services support. Such participation shall be treated as an investment
and should be without any contingent liability for the bank. The eligibility criteria for these banks will
be as under:
(i) The CRAR of the bank should not be less than 10%;
(ii)The level of NPAs should be reasonable;
(iii) The bank should have net profit for the last three consecutive years.
6. All banks entering into insurance business will be required to obtain prior approval of the
Reserve Bank. The Reserve Bank will give permission to banks on case to case basis keeping in view
all relevant factors including the position in regard to the level of non-performing assets of the
applicant bank so as to ensure that non-performing assets do not pose any future threat to the bank in
its present or the proposed line of activity, viz., insurance business. It should be ensured that risks
involved in insurance business do not get transferred to the bank and that the banking business does
not get contaminated by any risks which may arise from insurance business. There should be arms-
length relationship between the bank and the insurance outfit.

Notes: -
1. Holding of equity by a promoter bank in an insurance company or participation in any form in
insurance business will be subject to compliance with any rules and regulations laid down by the
IRDA/Central Government. This will include compliance with Section 6AA of the Insurance Act as
amended by the IRDA Act, 1999, for divestment of equity in excess of 26 per cent of the paid up
capital within a prescribed period of time.
2. Latest audited balance sheet will be considered for reckoning the eligibility criteria.
3. Banks which make investments under paragraph 5 of the above guidelines, and later qualify for risk
participation in insurance business (as per paragraph 2 of the guidelines) will be eligible to apply to
the Reserve Bank for permission to undertake insurance business on risk participation basis.

Examples of Bancassurance in India:
Indian banks with such arrangement
Kotak Mahindra
Example - 1
On December 28, 2000, the State Bank of India (SBI) announced a joint venture partnership with
Cardif SA (the insurance arm of BNP Paribas Bank). This partnership won over several others
(with Fortis and with GE Capital). Many experts in the industry have awaited the entry of the
SBI. It was well known that the SBI has long harboured plans to become a universal bank (a
universal bank has business in banking, insurance and in security). For a bank with more than 13,000
branches all over India, this would be a natural expansion. In the first round of license issue, the SBI
was absent. There were several reasons for this delay. First, the SBI was seeking a foreign partner to
help with new product design. Second, it did not want the partner to become dominant in the long
run (when the 26% foreign investment cap is eventually lifted). It wanted to retain its own brand
name. Third, it wanted a partner that is well versed in the universal banking business. This
criterion ruled out an American partner where underwriting insurance business by banks has been
strictly forbidden by law (although with the passage of the Gramm-Leach-Blily Act, this is not
quite as drastic as before). Cardif is the third largest insurance company in France. More than
60% of life insurance policies in France are sold through the banks. Fourth, the Reserve Bank of
India (RBI) needed to clear participation by the SBI because in India banks are allowed to enter
other businesses on a case by case basis. The SBI entry is groundbreaking for several reasons.
This was the first for an Indian bank to enter the insurance market.10 Second, even though the
regulators have said that banks would not (generally) be allowed to hold more than 50% of an
insurance company, the SBI was allowed to do so (with a promise that its share would be
eventually diluted).

Example 2

Standard Chartered Bank, the largest international bank in the India, announced a joint venture
with Max Bupa on Feb 3, 2014.
Max Bupa Health Insurance is a 74:26 joint venture between Max India Limited, a multi-business
corporate with expertise in life insurance and health care and Bupa, a leading international
healthcare provider with 65 years of healthcare knowledge. Max Bupa brings together a
combination of Bupas global health insurance expertise and customer service expertise with Max
Indias understanding and experience of the Indian health and insurance sectors. Max Bupa
Health Insurance has a direct working relationship with a network of over 3400 top quality
hospitals and healthcare providers and at the same time the company plans to extend its network
of hospitals to other parts of the country. Max Bupa services customers directly without third
party involvement.
Standard Chartered Bank is Indias largest international bank with 99 branches in 42 cities,
serving 40,000+ SMEs, over 2,500 key Corporate and Institutional Relationships and approx 2
million retail customers. Key businesses comprise Consumer Banking, including Deposits,
Loans, Wealth Management, Private Banking and SME Banking; and Wholesale Banking, which
includes Cash Transaction Banking, Treasury, Corporate Finance and Custody Services.
Standard Chartered will distribute Max Bupas health insurance products to its customers across
its 99 branches spread over 42 cities in India. Max Bupa will work with Standard Chartered Bank
to ensure sales training, product support and smooth operational processes in order to offer Max
Bupas health insurance products to customers seeking a health cover for themselves and their
family. This arrangement will reflect the core philosophy of Max Bupa of building unique
product proposition around customer needs and Standard Chartered Banks philosophy to provide
best in class customer experience.
Max Bupa Health Insurance plans for Standard Chartered Bank customers are underwritten and
issued by Max Bupa Health Insurance Company Limited. Claims will be settled by Max Bupa
Health Insurance Company Limited as per the terms and conditions of the policy.

Example 3

Malaysia: Mayban Life Insurance, incorporated in 1992, was established as a dedicated
bancassurance arm of Maybank of Malaysia. Mayban decided to employ bancassurance and
leverage on the banks brand name and branch network to break the tight grip of a handful of
large life insurers in the Malaysian market. The highly integrated model employed (i.e., Maybank
Life Insurance as a subsidiary of Maybank bank) allowed the life insurers exploit the customer
base of its parent company (about five million customers) through some 265 Maybank and 100
Mayban Finance branches. The company was able to pass on some of the cost saving to
customers. It has also succeeded in using banks other capabilities like payment services. In a
similar fashion, Mayban General Assurance (Berhad) was established later in a partnership with
Fortis to distribute non-life insurance products (This example is taken from Sigma 7/2002).

Example 4

In January 2004, Oriental Insurance Company declared that it would distribute insurance policies
through the post offices after it announced a joint venture with the Department of Posts. Given
that the post offices have unprecedented reach around the country with 155,600 branches, it could
distribute policies to the customers even in very remote areas. The Department of Posts is the
only institution with a reach bigger than the banks in India.

Example 5

AIA Group Limited and Citibank have reached agreement on a landmark exclusive
bancassurance partnership that encompasses 11 markets in the Asia-Pacific region on December
2013. The markets included in the agreement are: Hong Kong, Singapore, Thailand, China,
Indonesia, Philippines, Vietnam, Malaysia, Australia, India and Korea. The exclusive distribution
agreement is for a 15-year period. The partnership involves all retail distribution channels,
including branches, telemarketing and online channels. It covers both retail and group life
insurance product areas1 providing access to Citibanks corporate clients and approximately 13
million existing retail cardholders and banking customers in the 11 markets. Debevoise &
Plimpton LLP is acting as legal counsel to AIA on the transaction.
AIA Group Limited and its subsidiaries comprise the largest independent publicly listed pan-
Asian life insurance group. It has operations in 17 markets in Asia-Pacific wholly-owned
branches and subsidiaries in Hong Kong, Thailand, Singapore, Malaysia, China, Korea, the
Philippines, Australia, Indonesia, Taiwan, Vietnam, New Zealand, Macau, Brunei, a 97 per cent
subsidiary in Sri Lanka, a 26 per cent joint venture in India and a representative office in
Citi, the leading global bank, has approximately 200 million customer accounts and does business
in more than 160 countries and jurisdictions. Citi provides consumers, corporations, governments
and institutions with a broad range of financial products and services, including consumer
banking and credit, corporate and investment banking, securities brokerage, transaction services,
and wealth management.

Example 6

Japan: The first phase of deregulation of bancassurance in Japan began on April 1, 2001.14 The
range of products that banks are allowed to distribute was expanded from October 1, 2002. One
of the first products that banks were allowed to sell was credit life insurance. Banks are now
allowed to distribute personal pension insurance, asset formation insurance, individual life
annuity and accident insurance, and personal accident insurance. All of this is expected to
translate into a bancassurance boom in Japan.

The life insurance industry in India has been progressing at a rapid pace since opening up of the sector
in 2000. The size of the country, a diverse set of people combined with problems of connectivity in
rural areas, makes insurance selling in India a very difficult proposition. Life insurance companies
require immense distribution strength and tremendous manpower to reach out to such a huge customer
base. This distribution will undergo a sea change as various insurance companies are proposing to
bring insurance products into the lives of the common man by making them available at the most
basic financial point, the local bank branch, through Bancassurance. Simply put, bancassurance is the
process through which insurance products are sold to customers at their local banks.
With a banking network of 65,000 branches serving more than 300 million retail banking customers,
insurance can be available at affordable prices to people even in remote corners of the country.
The relationship is symbiotic; but there are challenges. The most common challenges to success are
poor manpower management, lack of a sales culture within the bank, no involvement by the branch
manager, insufficient product promotions, failure to integrate marketing plans, marginal database
expertise, poor sales channel linkages, inadequate incentives, resistance to change, negative attitudes
toward insurance and unwieldy marketing strategy.
Even insurers and banks that seem ideally suited for a bancassurance partnership can run into
problems during implementation. Before targeting the market, it is essential to do a SWOT analysis.
One more important obstacle in development of bancassurance in India has been a set of regulatory
barriers. Some of these have recently been cleared with the passage of the Insurance (Amendment)
Act, 2002. Looking at the west where sales through the banking network have been a roaring success,
the Indian banking sector has far to go. But one thing stands obvious. If insurance in India is to
succeed, it can only be through the Bancassurance channel.
Reasons for growing phenomena of Bancassurance
The opening up of the insurance industry to private sector participation in December 1999 has led to
the entry of 20 new players, with 12 in the life insurance sector and eight in the non-life insurance
sector. Almost without exception these companies are seeking to utilize multiple distribution channels
such as traditional agency, bancassurance, brokers and direct marketing. Bancassurance is seen by
many to be a significant or even the primary channel (the latter being the case for at least SBI Life).
In other Asian markets we have seen bancassurance make significant headway in recent times.
For example, bancassurance accounted for 24% of new life insurance sales by weighted premium
income* in Singapore in 2002. This is a significant increase on the equivalent 2001 statistic of 15%
and is as a result of growth in significant bank-centric bancassurance operations. In Hong Kong the
figure for 2002 is expected to be at the 20% level for the same basic reasons.
Life insurance premium represents 55% of the world insurance premium, and as the life
insurance is basically a saving market. So it is one of the methods to increase deposits of
In non-life insurance business banks are looking to provide additional flow of revenues from
the same customers through the same channel of distribution and with the same people.
Insurers have been turning in ever-greater numbers to alternative modes of distribution
because of the high costs they have paid for agent services. These costs became too much of a
burden for many insurers compared to the returns they generated.
Insurers operate through bancassurance own and control relationships with customers.
Insurers found that direct relationships with customers gave them greater control of their
business at a lower cost. Insurers who operate through the agency relationship are hardly
having any control on their relationship with their clients.
The ratio of expenses to premiums, an important efficiency factor, it is noticed very well that
expenses ratio in insurance activities through bancassurance is extremely low. This is because
the bank and the insurance company is benefiting from the same distribution channels and
It is believed that the prospects for increased consolidation between banking and insurance is
more likely dominated and derived by the marketing innovations that are likely to follow
from financial service modernization. Such innovations would include cross selling of
banking, insurance, and brokerage products and services; the increased use of the Internet by
consumers; and a melding of insurance and banking corporate cultures.
One of the most important reason of considering Bancassurance by Banks is increased return
on assets (ROA). One of the best ways to increase ROA, assuming a constant asset base, is
through fee income. Banks that build fee income can cover more of their operating expenses,
and one way to build fee income is through the sale of insurance products. Banks that
effectively cross-sell financial products can leverage their distribution and processing
capabilities for profitable operating expense ratios.
By leveraging their strengths and finding ways to overcome their weaknesses, banks could
change the face of insurance distribution. Sale of personal line insurance products through
banks meets an important set of consumer needs. Most large retail banks engender a great
deal of trust in broad segments of consumers, which they can leverage in selling them
personal line insurance products. In addition, a banks branch network allows the face-to-face
contact that is so important in the sale of personal insurance.
Another advantage banks have over traditional insurance distributors is the lower cost per
sales lead made possible by their sizable, loyal customer base. Banks also enjoy significant
brand awareness within their geographic regions, again providing for a lower per-lead cost
when advertising through print, radio and/or television. Banks that make the most of these
advantages are able to penetrate their customer base and markets for above-average market
Other bank strengths are their marketing and processing capabilities. Banks have extensive
experience in marketing to both existing customers (for retention and cross selling) and non-
customers (for acquisition and awareness). They also have access to multiple communications
channels, such as statement inserts, direct mail, ATMs, telemarketing, etc. Banks' proficiency
in using technology has resulted in improvements in transaction processing and customer
By successfully mining their customer databases, leveraging their reputation and 'distribution
systems (branch, phone, and mail) to make appointments, and utilizing 'sales techniques and
products tailored to the middle market, European banks have more than doubled the
conversion rates of insurance leads into sales and have increased sales productivity to a ratio
which is more than enough to make bancassurance a highly profitable proposition.
Insurers have much to gain from marketing through banks. Personal-lines carriers have found
it difficult to grow using traditional agency systems because price competition has driven
down margins and increased the compensation demands of successful agents. Over the last
decade, life agents have sold fewer and larger policies to a more upscale client base. Middle-
income consumers, who comprise the bulk of bank customers, get little attention from most
life agents. By capitalizing on bank relationships, insurers will recapture much of this
underserved market.
Most insurers that have tried to penetrate middle-income markets through alternative channels
such as direct mail have not done well. Clearly, a change in approach is necessary. As with
any initiative, success requires a clear understanding of what must be done, how it will be
done and by whom. The place to begin is to segment the strengths that the bank and insurer
bring to the business opportunity.
Why Bancassurance in India?
The management of the new Indian operations are conscious of the need to grow quickly to reduce
painful start-up expense overruns. Banks with their huge networks and large customer bases give
insurers an opportunity to do this efficiently.
Regulations requiring certain proportions of sales to the rural and social sectors give an added impetus
to the drive for bancassurance. Selling through traditional methods to these sectors can be inefficient
and expensive. Tying up with a bank with an appropriate customer base can give an insurer relatively
cheap access to such sectors. This is still an issue for insurers despite the recent widening of the
definition of the rural sector (so that it now accords with the census definition).
In India, as elsewhere, banks are seeing margins decline sharply in their core lending business.
Consequently, banks are looking at other avenues, including the sale of insurance products, to
augment their income.
The sale of insurance products can earn banks very significant commissions (particularly for regular
premium products). In addition, one of the major strategic gains from implementing bancassurance
successfully is the development of a sales culture within the bank. This can be used by the bank to
promote traditional banking products and other financial services as well.
Bancassurance is not simply about selling insurance but about changing the mind-set of a bank.
In addition to acting as distributors, several banks have recognised the potential of insurance in India
and have taken equity stakes in insurance companies. This is perhaps the precursor of a trend we have
seen in the United Kingdom and elsewhere banks started off as distributors of insurance but then
moved to a manufacturing role with fully owned insurance subsidiaries.
Bancassurance plays a major role in worldwide insurance and dominates several major European
markets such as France and Italy. Its market share is expected to increase with the deregulation taking
place in several Asian countries and in the UK.
Bancassurance encompasses a variety of business models. We

believe these business models fall
broadly in three categories:
Integrated models (where the bancassurance activity is closely tied to the banking business).
Advice-based models (where there is less integration and the distribution is based on using
professional insurance advisers to sell to the clients of the bank).
Open architecture models.
The business model tends to impact all aspects of the bancassurance activity including the company
structure, sales and marketing, product design, and sales remuneration.
In most countries, bancassurance has tended to see a gradual evolution in the products offered from
protection business closely related to the banks lending activity to general savings business and
finally to a wider range of protection products.
In many countries, the choice of a business model is influenced by regulatory constraints (e.g., the
minimum qualification required to sell insurance products, the type of products that banks are allowed
to sell, or the nature of the relationship between banks and insurance companies).
Bancassurance is an efficient distribution channel with higher productivity and lower costs than
traditional distribution channels. These cost advantages are particularly significant in the more
integrated models