Bancassurance is the sale of life, pension and investment products through the branch network of a bank.

The recent merger announcement of HDFC Bank and Centurion Bank of Punjab Ltd is expected to impact the business of Aviva Life Insurance Co Ltd and ICICI Lombard General Insurance Co Ltd. Centurion Bank is the bancassurance partner for these two insurers.

Prime role

The arrangements might be discontinued because HDFC Bank sells life and non-life insurance policies of group companies HDFC Standard Life Insurance Co Ltd and HDFC General Insurance Co Ltd.

After opening up of the insurance sector, banks have come to occupy an important role in insurance distribution, particularly for private life insurers.

Banks procure nearly 40 per cent of fresh business for life insurers. It is not surprising therefore to have life insurers whose very lifeline is their banking partners.

For new private life insurers who want to achieve fast revenue growth, banks are only source of business. Banks also find that selling life insurance products is a lucrative activity.

Normally bancassurance deals are for three years and each bank can represent only one insurer as a corporate agent.

However, new private life insurers are finding it difficult to sign up a banking partner to sell their products as early entrants have already inked distribution agreements with them.

Realising their vital role, banks are now dictating the terms of the bancassurance deals. In some cases banks are demanding commission and other fees, say experts.