Banks opt for more team mates prior to insurance forays

It now needs more than two to tango in the insurance sector, if the latest trend is anything to go by. Aspiring commercial banks seeking a pie of the fast growing insurance market - both life and non-life - is opting for a three-way or four-way tie-up to fullfill their bancassurance dreams.

The trend was started by the Allahabad Bank, which was followed by others like the Kochi-based Federal Bank and Andhra Bank, reports Financial Express.

According to industry insiders, the move was the offshoot of the intense competition in the sector, which has necessitated not just financial mite and underwriting skills, but good marketing skills, reach and more insight into the market vagaries.

Earlier, the norm was to pick a foreign insurance partner company by a local bank and leverage on each other’s strength to get started. “But, with the market getting matured and competition turning hot, companies now require an extra hand or two for support,” said an industry veteran adding, “if the two-way alliances were the order of the day in the past, the time has come for the need of more partners who have something extra to bring to the table.”

The new trend of grand alliances was started by Allahabad Bank, when it chose to have more than two partners in its proposed general insurance company. The bank has forged a five-way alliance with the Chennai-based Indian Overseas Bank (IOB), Dabur, Karnataka Bank, Bank of Rajasthan (BoR) and, Sampo Insurance of Japan to float the new company. The alliance has reduced to four when BoR decided to walk out of the joint venture.

Federal Bank joined hands with IDBI and Fortis to float an insurance company.

Similarly, Andhra Bank in August announced its in-principle agreement to form a life insurance joint venture (JV) company with DAIICHI Mutual Life Insurance Company of Japan and Bank of India, subject to regulatory, statutory approvals and fulfillment of certain other conditions.