Banking institutions and business of insurance- study of Indian approach
Author(s): Anjali Bhatt
Abstract: Economy of any country is widely dependent on confluence of two important financial sectors which are banking and Insurance companies. Banks aim at providing credit and saving services whereas the main purpose of Insurance companies is to indemnify the losses to individuals. Thus, there prevails significant differences in functions pertaining to both the financial intermediaries. Despite of prevent difference, there are some confluence factor which can help in bridging the functions of banks and insurance companies. Few example of connecting factors are the mutual capital dependence of the two, commonality of features in the products of the two like life insurance products and investment products offered by banks. Also, general insurance can help banks by securing mortgage loss.Bancassurance is the process whereby the functioning of both the sectors can be linked on cooperative as well as competitive levels. Banks having larger customer base and wide outreach amongst the public can help in the sensitization and sale of insurance products. The paper shall discuss the concept of bancassurance and its possible models of implementation. Also the paper shall talk about the regulatory aspects of bancassurance wherein it shall focus on the guidelines issued by Reserve Bank of India and Insurance Regulatory and Development Authority for Banks and Insurance Companies respectively with special focus on Bancassurance. Last, the paper shall focus on the merits and demerits of the concept both from the viewpoint of customers as well as banks and insurance companies.