The deregulation of interest rates on savings bank (SB) account seems to be encouraging banks to offer value added services to customers.
Some banks are increasingly exploring the possibility of providing insurance cover on liabilities products such as SB account and fixed deposits instead of offering higher interest rates.
While providing accident insurance is common with most banks, some banks are also offering health insurance apart from looking at the possibility of offering custom made schemes bundled with deposits.
Apart from general insurance, banks are also looking at the possibility of bundling life insurance products.
Banks either bear a portion of the costs incurred on the premium of such insurance or subsidise the premiums to lure a customer.
Banks earn a fee-based income on such services. Banks already provide insurance schemes with asset products such as loans and overdrafts.
“We have a tie-up with Oriental Insurance wherein we offer royal mediclaim policy to our SB customers. This is a group insurance scheme at subsidised premium and covers people up to the age group of 80 years,” said Mr K.R. Kamath, Chairman and Managing Director, Punjab National Bank.
There is scope for product innovations in this segment, he added.
State Bank of Hyderabad is also working on offering health insurance to its customers at no additional cost. “We are currently in talks with a few general insurance companies to offer this facility,” said Mr M. Bhagavantha Rao, Managing Director, State Bank of Hyderabad.
According to Mr Tapan Singhel, Chief Marketing Officer, Bajaj Allianz General Insurance, customers usually prefer these as complimentary service.
Such insurance schemes are offered as group insurance policy wherein banks become the group manager and pay the premium, he said.
Allahabad Bank, which offers accident cover to its SB account holders, for instance, often bears the premium cost.
Custom-made schemes
Insurance companies, both life and non-life, on their part, are sensing a huge opportunity on devising custom-made schemes to go along with such liabilities products.
“There is scope of devising custom-made products on group platform. A few banks have approached us and we have given them quotations,” said Mr A.S. Narayanan, Chief Distribution Officer, Bajaj Allianz Life.
However, things are yet to be finalised, he added.
“In rural and semi-urban areas, the demand for liabilities products is typically higher than loans. Insurance schemes can be tailor-made keeping in mind the income cycle of a rural customer,” said Mr Pawan Verma, Chief Operating Officer, Star Union Dai-ichi Life.