Several insurance companies worldwide have been tying up with commercial banks to sell insurance policies; this has been called ‘bancassurance’. This practice has the obvious benefit of providing unlimited access to the wide network of commercial banks. Aviva Life Insurance has been in the line of bancassurance.
Aviva is in fact the global leader in bancassurance. Aviva Life Insurance has a tie up with Indusland Bank, DBS, and Punjab & Sind Bank in India for its insurance business. The induction of Syndicate Bank into Aviva Life Insurance is expected to prove very beneficial to the Company given the network of over 1500 branches that Syndicate Bank has.
Dabur India, a leading manufacturer of consumer goods in India, holds a 74% stake in Aviva Life Insurance while the remaining 26% is owned by the parent Aviva Group.
According to Mohit Burman of Dabur Group, the deal is in process and a decision is expected to be taken today in the Board Meeting of Aviva Life Insurance.
It is not yet known whether the promoters are going to offload the required shares from their shareholdings or whether there will be a further issue of shares in addition to the existing paid-up capital of Rs.2,400 crore as part of the deal. The market expectation is that the shares will be offered to Syndicate Bank at a discount on the face value of the shares.
Despite the advantage of bancassurance to insurance companies, not a great lot of headway has been made in the field in India. Thought there are more than 80,000 branches of various banks spread across the country, insurance is available through a mere 7,000 of them belonging to a handful of banks. The current deal between Aviva Life Insurance and Syndicate Bank may change all that. (The flip side may be that banks would now be less welcome places to weary customers wary of insurance agents!!)
