Impact of Bancassurance on The Financial Performance of Life Insurance Companies in Nepal

Abstract

Bancassurance is the distribution of insurance companies‟ products through the banking channel. Bancassurance has brought the new distribution channel in the insurance sectors leading to enhance the insurance business with the partnership with the banks in order to increase the client base and the profit of both insurance companies and banks. Though the concept of bancassurance started from France in 1970s, it is a new phenomenon for Nepal. It was introduced by Laxmi Bank Limited in 2006.Currently all the commercial banks and the insurance companies has entered into the bancassurance agreement. This new phenomenon (bancassurance) has provide the Nepalese insurance companies a new opportunity to sell their products through banking channels in each and every corner of the country as there will be at least a branch of commercial bank will be in each local level under federal system.

This study is a perceptual study on the impact of bancassurance on the financial performance of insurance companies in Nepal. With the use of variables such as cost reduction, market shares and liquidity this study tries to find out the impact of bancassurance on the financial performance (profitability) of life insurance companies of Nepal.

In this study, descriptive research design was adopted. The target population of the study was the life insurance companies of Nepal. The total sample of 105 was taken to perform the research. The questionnaire was used as an instruments to collect the data form the respondents. The convenience sampling method was used to collect the data. The data was analyzed using Statistical Package for Social Science (SPSS) 20. The various statistical tools such as frequency & percentage, descriptive analysis, correlation analysis, regression analysis, ANOVA test and reliability test were used in the research study.

This study revealed that the insurance companies are able to reduce their cost since the adaptation of the bancassurance. On liquidity, the life insurance are able to realize the increase in premium amount since the adaptation of the bancassurance. Additionally, the life insurance companies are able to increase their market shares and the market coverage by selling their products through the banking channels. The positive impact of bancassurance on cost, liquidity and the market shares can be replicated form the increased profitability. From this research study it can be concluded that the bancassurance has impact on the financial performance of the life insurance companies of Nepal. Hence, it is recommended for insurance companies to enter the bancassurance agreement with the banks for achieving the countrywide customer access, increase premium and ultimately enhance the profitability of the company.