Get complete information on Insurance as Banking Institutions (India)

Get complete information on Insurance as Banking Institutions (India)

The life insurance and general insurance corporations are performing their respective functions with the help of banks. LIC and GIC have opened their accounts with banks. Policyholders have to approach the banks for realisation of cheques.

Indirectly banks have to intervene in their business. If the insurance companies perform the business of banking institutions, they get benefits of business in financial transactions.

Policyholders are also benefited as they have not to run from pillar to post. The claim amounts will be deposited in insurance banks. The account holders get all the benefits and facilities of banks. It can be analysed under premium Collection, claims, payment, pension plans, funds, and investment consultant and employment opportunities.

Bancassurance is a strategy adopted by banks or insurance companies arming to operate in the financial market in a more or less integrated manner. It is inter-linkage of different financial services as went as the distribution of these products.

Premium Collection:

Insurance as bank will facilitate deposits of premium. The burden on cash-counter is lessened or the cash transaction is shifted to insurance bank.

The premium amount is regularly collected without any pressure on other activities of insurance. Insurance business is expanded with extra zeal and effort as people working in the marketing areas develop specialisation.

They devote with additional knowledge and equipment for the expansion of insurance business on the other hand. Management of premium collection becomes easy as the insurance bank has diversified its activities. New bank customer gets information about insurance.

They collect analyses and reinforce the available information at insurance- bank counter from the fellow depositor of premiums and receivers of claims-amount. Insurance policy is accepted by its realisation of actual benefits towards which Indian population is apathetic.

The premium account is regularly collected as the customers visit often the insurance-bank for their daily transaction. They are reminded of premium-deposits. The premiums collected are deposited in a commercial bank who use the money for their transactions and investment. If so much money is retained by insurance-bank, it would be utilised by them for getting some profit on the money.

The public is accustomed to get insurance and banking services at a place. Insurance industry will work like a multiple shop store were in all the financial functions would be performed by them. The investor would also come to the insurance offices for getting all the information and services fulfilled. However the insurance-bank should not have to confine only on insurance-investment but should have widen its horizon to help all types of people seeking financial suggestions.

Payment of premium would be easy and prompt if the policyholder has opened account with the insurance-bank. It would be like salary saving scheme wherein no policyholder would bother for monthly remittance of premium. Merely accounting transaction in the insurance-bank facilitate the payments.

The account holder would be reminded of the minimum balance in the account for payment of premium. The insurance bank becomes total bank of people as it takes cares of all financial transactions. Payment of electricity bill income tax and business-invoices would be easy by insurance- bank.

Total income received by insurance industries comes through banks. In other-words, banks maintain its total income which increased from Rs. 11,826 crore in 1990-91 to Rs. 40,067 crores in 1997-98 by 3.39 times during the period of seven years.

If this amount is not deposited or transacted through commercial banks all these money is used by insurance industries as bank too. Therefore, it is advisable for the insurance industry to start its own bank wherein public is also invited to transact as bank-customer.

Thus the deposit of insurance industry in a year would exceed Rs. 50 thousand crore at the minimum. Bank certainly gets some benefit on the amount deposited by insurance. They maintain their liquidity level and invest rest of the money received from insurance. This earning would be earned by insurance companies as commercial banks if they transact business of a commercial bank.

Claims Payment:

The claims-amount paid by the insurance industry is not immediately used by the clients. It is deposited in the bank from whereby they withdraw their amount from time to time leaving a sufficient amount with the bank for their investment as per rules. If this amount is retained by the insurance-bank, the money would be utilised for further investment.

The client’s account in the insurance-bank is immediately credited with the amount of claim from which they withdraw amount from time to time. SUCH TYPES of facilities of premium-deposits and claim-settlement by bank motivate public to deal with the insurance, bank wherein they would prefer to deposit their other savings.

Old-age people get monthly withdrawal of the amount. They would not suffer any more by making queue commercial banks. The technological development wherein phone and computer facilities would serve their clients at their home. Employment opportunities would increase as expert people would have been appointed to meet he clients at the residence who would pay cash at the time of need.

Only telephone facilities would do all the jobs as automatic-services would be completed on computers. If the client has personal computer it would be mere useful and efficient services to them. The claim amount of insurance industry reveals the banking business based only on it.

The claim amount of insurance industry has increased from Rs. 3,849 crores in 1990-91 to Rs. 13,448 crore in 1997-98 by 3.49 times during seven years. It reveals that amount Rs. 13 thousand crore money would have been with the insurance-bank for a time-being as is put in commercial banks.

The commercial banks collect to much of funds from insurance industry. They credit the amount with the accounts of their depositors who do not withdraw all the amount at a time.

They gradually withdraw it leaving a major portion with the bank. Similarly a major portion of claim amount remain in float i.e. date of writing the cheque to the date of realisation in account. This float would be abolished if the insurance-bank is opened as it would do all the payments merely passing certain entries.

It is thus clear that insurance bank would use a major portion of claims-payment for its transactions which are used by commercial banks. The insured can get the amount of claims in pension form which would again help insurance-expansion.

The clients would get pension regularly from the insurance baric which can start door to door financial services. There exists a large potential of business of financial nature in adopting insurance-banking systems.

Pension Plans :

People are investment-oriented. Risk of life is universal truth but people by their nature are least concerned with life insurance coverage. If insurance-bank is opened, people will enjoy the benefits of pension plans by depositing the saving, claim amount and purchasing pension plans.

The number of persons insured under group superannuation schemes has increased from 2.43 lakhs in 1990-91 to 6.71 lakhs in 1997-98 by two fold and the amount of annuities increased from Rs. 253.12 crores to Rs. 682.94 crores in the corresponding year by the same proportion. The rising trend reveals that LIC can manage a significant amount by its insurance bank. All the money is not immediately paid. A certain portion is paid as different interval.

The rest of amount is managed as bank-money for credit and investing in the growing economy of India. Insurance-bank would perform better than the commercial bank. The claim amount would also be deposited with the insurance-bank from where a new pension-plan can be purchased.

The total claim amount is usually converted into pension-plans. People would be benefited by such schemes. They are given option either to take all the money at the time of claim or convert some of them or all of them into pension-plan. This facility would benefit a large number of policyholder who would enjoy it and the LIC would get sufficient amount for financial transactions. The employment opportunities would increases and the contribution to economic development would be appreciable.

The insurance fund is significant contribution to national income as it is invested for economic development. The amount of fund available with LIC would increase further as saving in form premium income, claim amount and other out go would also enhance as a result of establishment of insurance bank.

The investible funds for LIC has been Rs. 1,05,832 crore in 1997-98 as compared to Rs. 28,400 crore in 1990-91 an increase of372.6 per cent. It is a welcome step. If LIC starts its banking business, the life insurance functions only will enhance the investible fund by more than 15 per cent of the total life fund.

It is clear from table 49.6 that the investible bank fund would have been Rs. 14,787 crore in 1997-98 if insurance had started its banking business because about 50 per cent of outgo will remain in the bank for gradual withdrawal and the premium income would increase by 50 per cent as a result of banding operation. The total bank investible fund was expected to be Rs. 32,994 crore in 1990-91 an increase of 369 per cent over the period of seven years.

The deposits at banks have revealed that Rs. 2,718 crore was lying with commercial banks in 1997-98 which was Rs. 889 crore in 1990-91. The banks are not bothering for the remittance in transit which was Rs. 485 crore in 1997-98. On current account LIC is earning nothing which accounted Rs. 728 crore in 1997-98. The deposit account would have been properly utilised by LIC. Thus, it is clear that LIC would have earned sufficient income if it has opened its own bank.

Investment Consultant :

The Life Insurance business as well as allied business would have been increased if LIC starts investment consultancy. People should approach to the offices of LIC for expert advises on investment. The present position is that LIC agents approach to people for procuring insurance business.

But the people are investment-oriented. They go to take expert advises for investment to their relatives or private investment agents. The share-brokers and others are charging exorbitant fees from the investors. Their money is not properly invested. If LIC starts consultancy services. It would benefit a large number of investors.

Employment Opportunities :

Employment opportunities would increase if insurance bank starts functioning along with insurance- business. In foreign countries, insurance and banking business are co-existent. They perform better than pure insurance or banking business.

Direct and indirect employment generation is possible if insurance-bank starts functioning. The LIC Act 1956 and GIC Act 1972 would have to be amended sufficiently to permit LIC and GIC to start their banking business.

Bank as Insurance Institution :

The IRDA Act, 1999 has opened wide challenges to financial institutions. Now banks can also enter in insurance business. The insurance is the basic need of life. Uncertainty of life and death is reducing the working capacities of people because of tension involved. Once it is secured, person feels happy to perform life job effectively.

In a bank where he has his bank account, if he gets facilities of insurance; he would certainly purchase insurance policies. Insurance link deposit would be more attractive to the account holders. With payment of slightly a higher amount at the time of deposit, he can secure term insurance.

Term insurance would be the most appropriate form of life insurance to be sold by banks. Health schemes and accident-benefits can be lucrative business for a bank. The banks should chalk out at the earliest to start new business of life as well as general insurance. In Canada, many banks have been successfully doing this job.

Coordination:

The banking and insurance institutions would be working an competitive units but they are working in the same environment of India. Their coordination would strengthen their businesses.

Plans formulation, strategies implementation socio-economic development and technological upgrading are coordinately achieved by both the institutions although Insurance Regulation and Development Authority are there to guide them.

Their own thinking and mutual discussion would benefit them. The age is competition but survival is possible with coordination. It is know that both institutions would interchange experienced employees for their development.

Market Expansion:

People are aware of the product when there is a number of sellers. They go to the market where selective bargaining is present for purchasing a desirable article. People want to purchase a insurance policy e.g. Health and accident which is not available. People do not want to purchase money back which is sold by LIC.

These are mere examples. If people can find products of their choice in a market that is full of good sellers, they remain in the market. Ultimately insurance business would increase. A firm propagates his own product but at the same time propagates indirectly others product of the same line.

If Banks. Are telling about insurance benefits, LIC and GIC are also benefited. If insurance industry is telling banking, facilities, the banks are also indirectly benefited. Market expansion is inevitable in insurance area.