financialtreat – will explain about advantages and disadvantages of bancassurance that you will get in the following article.
financialtreat – will explain about advantages and disadvantages of bancassurance that you will get in the following article. Let’s look at this article carefully! Indonesian people are not very familiar with the term bancassurance. However, in fact, this program is often chosen as a feature of the ease of a bank customer in managing his savings.
The term bancassurance is a cooperation program between banks and insurance companies. The bank will sell insurance products from an insurance company directly to its customers and later both parties will share the profits from the commission on the sale of the insurance product. To find out the advantages and disadvantages of bancassurance, check out the following review!
Advantages and Disadvantages of Bancassurance
Types of Bancassurance Business Models
There are several types of business models known in the world, but in Indonesia itself, this type of business model is divide into 3 business models only, namely:
This business model is an insurance product marketing cooperation program where banks play a role in recommending insurance products to customers. The reference activity of this product is also distinguish into:
Reference in the framework of bank products, namely recommending insurance products as a condition of obtaining banking products to customers. Reference is not in the framework of bank products, namely insurance products that are not a condition of obtaining banking products to customers.
In the form of distribution cooperation, the bank will market insurance products by providing explanations to customers. Sales of insurance products can also be done directly through telemarketing, call centers, or direct marketing of the bank. There is also a product integration system that offers cooperation in marketing insurance products to customers by modifying or combining bank products with insurance products.
Examples of Bancassurance Cooperation in Indonesia
In the process of cooperation between banks and insurance companies, there are 3 forms of cooperation carry out to support its development in Indonesia, namely:
Marketing Agreement (Distribution Agreement), which is cooperation that is not bound to each other and does not have an exclusivity agreement. The bank only serves as a marketing outlet and is not oblige to provide customer data to the insurance.
Strategic Alliance Agreement is an exclusive cooperation between banks and insurance companies. The insurance party may use bank customer data to support marketing and together with the bank develop insurance products.
Joint Venture, which is an insurance company and a bank has a portion of the shareholding. The two can own shares of each other with a long-term vision and provide benefits for both parties. This collaboration allows banks to get access to customer data from the insurance and the insurance party to get access to customer data.
Bancassurance Products in Indonesia
With the cooperation between banks and insurance companies, both parties can plan products that have been integrate with each other. Even the insurance products offer have become jointly own to be market in their respective ways. Banks recommend insurance products to customers, and insurance companies recommend bank service features.
In Indonesia, there are many insurance companies that cooperate with banks in running this program. For example, PT AXA Mandiri Financial Services or often known as AXA Mandiri, which is a form of cooperation between PT Bank Mandiri Tbk which owns 51% of the shares, and the insurance company AXA with 49% of the shares.
In addition, there is also a collaboration between PT DBS Indonesia and PT Asuransi Jiwa Manulife Indonesia with the MiWealth Protection program for unit link insurance products that target high-end customers to protect their wealth.
There is also PT Bank KEB Hana Indonesia in collaboration with PT FWD Life Indonesia which markets premium single unit link insurance with one-time payment for Bank KEB Hana customers. With the segmentation of upper-middle customers, DBS-Manulife and KEB Hana-FWD Life products are intend for customers who earn more to enjoy their wealth in old age.
Advantages of Buying Insurance from Bancassurance Services
To ensure customers get the benefits of the program offer, of course there are many advantages offer by banks and insurance in marketing insurance products. Then what are the advantages of buying insurance from bancassurance services?
Some of its advantages are:
- Premium payments are easier because customers just agree to autodebet from a bank account without worrying about paying late every month.
- The transaction process is accompanied by the bank so that it is safer
- There are additional features provided by banks for customers who buy insurance products
- The bank fully supports the insurance claim process
How to Register Bancassurance
The ease of buying insurance products at the bank or at the insurance office is very easy. Usually banks that have insurance products will create a special booth to serve customers to buy insurance products offer. This is very easy because you just come to the bank as a customer and procees to a special insurance booth. Personal data already own by the bank will facilitate the next process.
Rights of Customers Who Buy Bancassurance Products
Customers who purchase insurance products from the bank will obtain the following rights:
- Entitle to sum insure
- A Entitle to additional benefits for certain insurance products such as critical illness, hospitalization, accidents, and others
- Entitle to information on changes and developments in the latest insurance products
- Obligations of Customers Who Buy Bancassurance Products
- In addition to obtaining his rights, a customer must also carry out his obligations, namely:
- Mandatory to pay premiums in accordance with the agreement
It is mandatory to provide the latest information if there is a change in personal data and other important information.
Duties and Responsibilities of Bancassurance Specialist
In carrying out this cooperation program, there is one profession that is generally encountere, namely bancassurance specialist. The profession also call bancassurance officer is an expert who will provide financial solutions to customers with insurance products such as health, pensions, education, and other investments. Work experience as a bancassurance specialist certainly requires special skills and skills to support its performance.
The duties and responsibilities of a bancassurance specialist are:
- Planning insurance marketing activities to various companies
- Work outside the office
- Monitoring and reviewing targets
- Establishing a relationship between a bank and a company
Tips for Choosing the Best Bancassurance in Indonesia
Of course, in planning an investment, you need to know how to choose a good and reliable bancassurance. Here are some tips in determining which insurance product is right for you.
Understand information about insurance through the official website or bank clerk
Choose several recommendations and compare insurance products to get one insurance product with the most appropriate benefits and according to your needs.
Find out about the experience of customers who use these insurance services. If the comment is positive, then this is a good sign
Ensure that insurance products have been registered with OJK
Choose insurance premiums that are in accordance with financial capabilities, considering that buying insurance products means that there will be premium dependents every month for a certain period of time.
Risks of Bancassurance
Although insurance products are initiate by well-known and large insurance companies and safe and reliable banking support, but there are some risks that you need to pay attention to. Here are 5 risks that may be encountere by bancassurance customers.
Funds are not guaranteed LPS
The Deposit Insurance Agency (LPS) is task to protect customer funds if the bank experiences a crisis or collapses. However, unfortunately the funds deposite in the purchase of insurance products are not guarantee by LPS so the funds will disappear in case of problems with the program.
There is a monopoly
A bank should work with several insurance companies to provide flexibility for customers to choose the insurance products they want. This is state in Bank Indonesia Circular Letter Number 12/35/DPNP date December 23. 2010 concerning the Implementation of Risk Management in Banks That Conduct Marketing Cooperation Activities with Insurance Companies.
However, what happens is that the bank only cooperates with one insurance company which means that the bank’s customers must be customers of the same insurance company.
Governance is not appropriate
In its application, insurance products are carry out with governance that is not in accordance with applicable regulations. For example, the bank requests a license fee in the form of a fix fee paid in advance during bancassurance cooperation.
However, this should be contrary to OJK Regulation No. 73/POJK.05/2016 concerning Good Corporate Governance for Insurance Companies which prohibits insurance companies from offering or giving something to other parties to influence decision making in terms of insurance transactions.
Supposedly, this insurance is a long-term insurance product manage by banks and insurance companies. In fact, there is currently the practice of termination of contracts or disbursement of insurance policies in the short term.
This happens if the insurance company’s reserve funds are insufficient. Then there will be a risk to the policy payment because the actual insurance funds are rotate in investments that provide maximum results in the long run.
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Insurance products can be loss-making
All insurance customers will expect high expectations of the insurance products they buy. However, insurance investments can be loss-making if the funds deposit are not rotate for profitable instruments such as mutual funds, bonds, and others.
After understanding the concept of this bancassurance business. Of course you can be more prepare and observant in choosing the right insurance investment method. Understanding the object of investment can avoid fraud and financial planning mistakes in the future.