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The Banking and Insurance industries have changed rapidly in the changing and
challenging economic environment throughout the world. In this competitive and liberalized
environment everyone is trying to do better than others and consequently survival of the
fittest has come into effect.

This has given rise to a new form of business wherein two big financial institutions
have come together and have integrated all their strength and efforts and have created a new
means of marketing and promoting their products and services. On one hand it is the Banking
sector which is very competitive and on the other hand is Insurance sector which has a lot of
potential for growth. When these two join together, it gives birth to BANCASSURANCE.

Bancassurance is nothing but the collaboration between a bank and an insurance

company wherein the bank promises to sell insurance products to its customers in exchange
of fees. It is a mutual relationship between the banks and insurers. A relationship which
amazingly complements each other¶s strengths and weaknesses.

It is a new buzz word in India but it is taking roots slowly and gradually. It has been
accepted by banks, insurance companies as well as the customers. It is basically an
international concept which is spreading all around the world and is favored by all.

Taking all these things into consideration I would like to present my project
³BANCASSURANCE (an emerging concept in India). The project flashes some light on
Bancassurance and how it is perceived by people in India. It deals with the conceptual part of
Bancassurance as well as its practical applications in India.

The main focus of this project is on benefits and importance of Bancassurance in

India. The regulations governing Bancassurance are also dealt with in this project. SWOT
analysis is also done so as to identify the various opportunities and threats for Bancassurance
in India.
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 The Indian as well as Global contexts both are taken into account. The project also
revolves around data, facts and figures that are necessary to prove the importance of
Bancassurance.

Further the project also includes the case study of SBI Life Insurance Company, its
various products, the growth they have experienced since the opening up of a wholly owned
subsidiary of SBI Bank that sells insurance products.

A survey analysis has also been done so as to know the popularity and the growth
perspectives of Bancassurance. The survey tries to identify whether the conditions are
favourable for it India or not. At the end some suggestions are also given to fill the potholes
that still exist in this system.

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1. Definition
2. History
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1. Definition
2. History

 
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Banking as per the Banking Regulation Act, Banking is defined as: -

³accepting for the purpose of lending of deposits of money from the public for the purpose of
lending or investment, repayable on demand through cheques, drafts or order.´

A sound and effective banking system is necessary for a healthy economy. The
banking system of India should not only be hassle free but it should be able to meet new
challenges posed by the technology and any other external and internal factors. Many new
things have come up in the banking sector in the recent years. Banks have adopted the new
technology because banking has not remained up to accepting and lending but now it is all
about satisfying the needs of the customers.
 The development of the Indian banking sector has been accompanied by the
introduction of new norms. New services are the order of the day, in order to stay ahead in
the rat race. Banks are now foraying into net banking, securities, and consumer finance,
housing finance, treasury market, merchant banking etc.They are trying to provide every kind
of service which can satisfy or rather we should say that it can delight the customers.

Entry of private and foreign banks in the segment has provided healthy competition
and is likely to bring more operational efficiency into the sector. Banks are also coping and
adapting with time and are trying to become one-stop financial supermarkets. The market
focus is shifting from mass banking products to class banking with the introduction of value
added and customized products.

 
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Insurance may be defined as: -
³It is a contract between two parties where by one party undertakes to compensate the
another party for the loss arising due to an uncertain events for which the another party agrees
to pay a certain amount regularly.´

In India, insurance has a deep-rooted history. Insurance in India has evolved over time
heavily drawing from other countries, England in particular. The insurance sector in India has
come a full circle from being an open competitive market to nationalization and back to a
liberalized market again. The business of life insurance in India in its existing form started in
India in the year 1818 with the establishment of the Oriental Life Insurance Company in
Calcutta.

The Insurance Act, 1938 was the first legislation governing all forms of insurance to
provide strict state control over insurance business.Today there are 14 general insurance
companies and 14 life insurance companies operating in the country. But today also the
insurance companies are trying to capture Indian markets as not many people are aware of it.

The 
 
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Together with banking services, insurance services add about 7% to the country¶s GDP. A
well-developed and evolved insurance sector is a boon for economic development as it
provides long- term funds for infrastructure development at the same time strengthening the
risk taking ability of the country.

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1. Meaning
2. Origin
3. Models of Bancassurance
i. Structural classification
ii. Product based classification
iii. Bank Referrals


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With the opening up of the insurance sector and with so many players entering the
Indian insurance industry, it is required by the insurance companies to come up with
innovative products, create more consumer awareness about their products and offer them at
a competitive price. Since the banking services, insurance and fund management are all
interrelated activities and have inherent synergies, selling of insurance by banks would be
mutually beneficial for banks and insurance companies. With these developments and
increased pressures in combating competition, companies are forced to come up with
innovative techniques to market their products and services. At this juncture, banking sector
with it's far and wide reach, was thought of as a potential distribution channel, useful for the
insurance companies. This union of the two sectors is what is known as Bancassurance.
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Bancassurance is the distribution of insurance products through the bank's distribution
channel. It is a phenomenon wherein insurance products are offered through the distribution
channels of the banking services along with a complete range of banking and investment
products and services. To put it simply, Bancassurance, tries to exploit synergies between
both the insurance companies and banks.

Bancassurance can be important source of revenue. With the increased competition

and squeezing of interest rates spread, profits are likely to be under pressure. Fee based
income can be increased through hawking of risk products like insurance. Bancassurance if
taken in right spirit and implemented properly can be win-win situation for the all the
participants' viz., banks, insurers and the customer.
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The banks taking over insurance is particularly well-documented with reference to the
experience in Europe. Across Europe in countries like Spain and UK, banks started the
process of selling life insurance decades ago and customers found the concept appealing for
various reasons.

Germany took the lead and it was called ³ALLFINANZ´. The system of
bancassurance was well received in Europe. France taking the lead, followed by Germany,
UK, Spain etc.

In USA the practice was late to start (in 90s). It is also developing in Canada, Mexico,
and Australia. In India, the concept of Bancassurance is very new. With the liberalization and
deregulation of the insurance industry, bancassurance evolved in India around 2002.
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Banks intending not to take risk could adopt µreferral model¶ wherein they merely part
with their client data base for business lead of commission. The actual transaction with the
prospective client in referral model is done by the staff of the insurance company either at the
premises of the ban0k or elsewhere. Referral model is nothing but a simple arrangement,
wherein the bank, while controlling access to the clients data base, parts with only the
business leads to the agents/ sales staff of insurance company for a µreferral fee¶ or
commission for every business lead that was passed on. In fact a number of banks in India
have already resorted to this strategy to begin with. This model would be suitable for almost
all types of banks including the RRBs /cooperative banks and even cooperative societies both
in rural and urban. There is greater scope in the medium term for this model. For, banks to
begin with can resort to this model and then move on to the other models.
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The other form of non-sick participatory distribution channel is that of µCorporate
Agency¶, wherein the bank staff as an institution acts as corporate agent for the insurance
product for a fee/commission. This seems to be more viable and appropriate for most of the
mid-sized banks in India as also the rate of commission would be relatively higher than the
referral arrangement. This, however, is prone to reputational risk of the marketing bank.
There are also practical difficulties in the form of professional knowledge about the insurance
products. This could, however, be overcome by intensive training to chosen staff, packaged
with proper incentives in the banks coupled with selling of simple insurance products in the
initial stage. This model is best suited for majority of banks including some major urban
cooperative banks because neither there is sharing of risk nor does it require huge investment
in the form of infrastructure and yet could be a good source of income. This model of
bancassurance worked well in the US, because consumers generally prefer to purchase
policies through broker banks that offer a wide range of products from competing insurers.
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Apart from the above two, the fully integrated financial service involves much more
comprehensive and intricate relationship between insurer and bank, where the bank functions
as fully universal in its operation and selling of insurance products is just one more function
within. This includes banks having wholly owned insurance subsidiaries with or without
foreign participation. The great advantage of this strategy being that the bank could make use
of its full potential to reap the benefit of synergy and therefore the economies of scope. This
may be suitable to relatively larger banks with sound financials and has better infrastructure.
As per the extant regulation of insurance sector the foreign insurance company could enter
the Indian insurance market only in the form of joint venture, therefore, this type of
bancassurance seems to have emerged out of necessity in India to an extent. There is great
scope for further growth both in life and non-life insurance segments as GOI is reported have
been actively considering to increase the FDI¶s participation up to 49 per cent.
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In this case bancassurance involves marketing of the insurance products through
either referral arrangement or corporate agency without mixing the insurance products with
any of the banks¶ own products/ services. Insurance is sold as one more item in the menu of
products offered to the bank¶s customer, however, the products of banks and insurance will
have their respective brands too.

(b) 
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This method aims at blending of insurance products as a µvalue addition¶ while
promoting the bank¶s own products. Thus, banks could sell the insurance products without
any additional efforts. In most times, giving insurance cover at a nominal premium/ fee or
sometimes without explicit premium does act as an added attraction to sell the bank¶s own
products, Y
credit card, housing loans, education loans, Y Many banks in India, in recent
years, has been aggressively marketing credit and debit card business, whereas the
cardholders get the µinsurance cover¶ for a nominal fee or (implicitly included in the annual
fee) free from explicit charges/ premium. Similarly the home loans / vehicle loans, Y  have
also been packaged with the insurance cover as an additional incentive.
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There is also another method called 'Bank Referral'. Here the banks do not issue the
policies; they only give the database to the insurance companies. The companies issue the
policies and pay the commission to them. That is called referral basis. In this method also
there is a win-win situation every where as the banks get commission, the insurance
companies get databases of the customers and the customers get the benefits.

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Research is one of the most important parts in the survey to collect information and
knowledge. Marketing research is defined as the systematic design, collection, analysis, and
reporting of data and findings relevant to a specific marketing situation facing the company.

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³A study of, how the Bancassurance channel influence on selling of insurance products
through the banks´.


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'c To understand the different distribution channels of Insurance.

'c How the banks act as a agent to sell the insurance products.
'c To understand the role of banks in development of insurance business.
'c To know how exactly the banks influence to their customers to buy the insurance
products.

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c The proposed study covers detailed examination in Davanagere city. It mainly focus
on in learning the clear information about the Bancassurance and finding out the factors that
highly influence on it.


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Since there are very few studies have been conducted in this area of study, the
researcher will use exploratory research methodology to better comprehend the nature of the
problem. So this involves extensive interviews with the citizen of the city as well as the
customers of SBI.

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Data needed for this research study is collected from both primary and secondary
sources.

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The primary data will be collected by administering the pre-tested questionnaires among the
customers of the selected sample unit, followed by indirect collection by interviews with
customers of different income levels and knowledge levels in selected area.


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The secondary data will be collected from the news papers, journals, publications
published by research institutions, university libraries as well as those published on internet
or websites.

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A Sample size of 50 respondents will be taken for the current study because it is not
possible to cover the whole universe in the available time period. So it is necessary to take the
sample size. The sample will the peoples of age group lying between eighteen to thirty years.
The sample will be taken in the form of strata based on age, sex, and income group.
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SBI Life Insurance is a joint venture between the State Bank of India and Cardif SA
of France. SBI Life Insurance is registered with an authorized capital of Rs 1000 crore and a
paid up capital of Rs 500 crores. SBI owns 74% of the total capital and Cardif the remaining
26%.

State Bank of India enjoys the largest banking franchise in India. Along with its 7
Associate Banks, SBI Group has the unrivalled strength of over 14,500 branches across the
country, arguably the largest in the world. Cardif is a wholly owned subsidiary of BNP
Paribas, which is the Euro Zone¶s leading Bank. BNP Paribas is one of the oldest foreign
banks with a presence in India dating back to 1860. Cardif is ranked 2nd worldwide in
creditor¶s insurance offering protection to over 35 million policyholders and net income in
excess of Euro 1 billion. Cardif has also been a pioneer in the art of selling insurance
products through commercial banks in France and in 35 more countries.

SBI Life Insurance¶s mission is to emerge as the leading company offering a

comprehensive range of Life Insurance and pension products at competitive prices, ensuring
high standards of customer service and world class operating efficiency.SBI Life has a unique
multi-distribution model encompassing Bancassurance, Agency and Group Corporate.

SBI Life extensively leverages the SBI Group as a platform for cross-selling
insurance products along with its numerous banking product packages such as housing loans
and personal loans. SBI¶s access to over 100 million accounts across the country provides a
vibrant base for insurance penetration across every region and economic strata in the country
ensuring true financial inclusion.

Agency Channel, comprising of the most productive force of more than 25,000
Insurance Advisors, offers door to door insurance solutions to customers.
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SBI Life-Horizon II is a unique, non participating Unit Linked Insurance Plan in Indian
Insurance Industry, where you need to be a financial market expert. This plan offers the
flexibility of Unit Linked Plan along with Automatic Asset Allocation which provides
relatively higher returns on your money where as increasing death benefits provide higher
security to your family

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This is a non participating individual unit linked product. It provides unmatched
flexibility to match the changing requirements. It provides choice of 5 investments funds in a
single policy

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SBI LIFE understand you better and hence have developed SBI Life - Unit Plus Child
Plan to suit you and your needs best. This Plan is meant for parents in the age group of 18-57
having a child between the age group of 0-15 years.

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In this policy the customer can choose the type of cover, type of fund to be invested in
and the term the customer wants to pay premium for.

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A unique Unit Linked Pension Plan that will enable the customers to build a kitty good
enough to enable them to spend a peaceful and financially sound, retired life. SBI Life -
Horizon II Pension is a safe and hassle free way to get high returns. It comes with the unique
feature of Automatic Asset Allocation by means of which you truly, don¶t need to be an
expert to grow your money.
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SBI Life understands the basic needs for pension plan and give the customers financial
strength to maintain the life style even after the retirement. This is a unit linked pension plan
wherein the policyholder chooses an investment period from 5 to 52 years for a vesting age
between 50 to 70 years. They can choose to pay either single premium or pay regular
premium for the entire policy term. Their contributions are invested into 4 fund options as per
their choice.

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It is a pension plan wherein the policyholder gets the flexibility to meet the post
retirement financial needs. It also provides tax benefits. The policyholder also has the option
of withdrawing a lump sum amount up to particular limit.
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SBI Life - Immediate Annuity Plan is introduced for Pension Policyholders. This product
provides annuity payments immediately from payment of purchase price. It has been
specially designed to cater to the annuity needs of existing policyholders (SBI Life - Lifelong
Pensions, SBI Life - Horizon II Pension, SBI Life - Unit Plus II Pension) at the vesting age.

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This is a Traditional Term Assurance Policy with guaranteed refund of basic premium.
Life cover is provided at no cost. Tax benefit is also provided. There is also a rebate on high
sum assured. There is also flexible benefit premium paying mode.

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It offers the customers with the life insurance cover at the lowest cost for a selected term.
Tax benefit is also provided. There is also rebate on modes of premium payment.

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A Keyman insurance policy is taken to protect the organization against the reduction in
profit resulting from the death of the Keyman. As per IRDA circular only Pure Term
Assurance Products may be used as a Keyman Insurance. The SBI Life Insurance provides
³SBI Life ± Shield´ as a Keyman Insurance Policy.
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SBI Life - Sudarshan is an Endowment Policy designed to provide savings and protection
to the policyholder and their family. They can save regularly for the future. Thus at the end of
the plan, he will receive a substantial amount of savings along with the accumulated bonuses
declared. At the same time, his family will be protected for death risk for the full Sum
Assured.

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Twin benefit of saving for the child's education and securing a bright future despite the
uncertainties of life. Option to receive the installments in lump sum at the due date of first
installment of Survival benefit.

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It is a Traditional Saving Plan with added advantage of life cover and guaranteed cash
inflow at regular intervals. The plan has a number of money back options specially suited to
the customers needs. The cover is available at competitive premium rates.

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It is a Traditional Saving Plan which offers a life cover for the term of the customer¶s
choice at the same time does not burden him with liability to pay premiums for the entire
term and also provides cash flows at regular intervals.

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It is a simple Unit Linked Non-Participating Insurance Plan. The sum assured is based on
Term and Premium amount. There is also flexibility to increase or decrease regular premium
and it also provides tax benefits.
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It is a Non-Participating yearly renewable traditional Group Gratuity Scheme. Under this
scheme, the contributions paid continue to accumulate on traditional platform of investments
and at the end of the financial year; an investment income earned on your contributions is
credited to your gratuity fund account.

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It is a Non-Participating yearly renewable traditional group superannuation scheme.
The object of this scheme is to ensure that the underlying fund is accumulated in such a
manner so that the fund will be sufficient to purchase an expected amount of annuity to an
employee upon his retirement / to the legal heir in the event of an unfortunate death during
service. The scheme would also entitle the employee for some benefit, defined as per the
scheme rules, on his resignation, retirement, permanent total disability whilst in service, death
whilst in service.

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It is a Non-Participating yearly renewable traditional group leave encashment scheme.
Under this scheme, the contributions paid continue to accumulate on traditional platform of
investments and at the end of the financial year; an investment income earned on your
contributions is credited to your CA-LE fund account.

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It is a scheme wherein life annuity is payable at a constant rate through out the life time.
Employees can choose the periodicity of the annuity depending upon the needs.
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It is a yearly renewable unit linked group gratuity plan. Along with managing the
gratuity fund a life cover on the employee¶s life protect their family financially in case of
unfortunate event.
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It is a traditional non participating Group Savings Linked Insurance scheme. This
scheme is applicable for both employer-employee and non-employer employee groups. It has
attractive returns on savings with twin benefits. It also provides protection at low cost with no
medical examination and also hassle free joining process with no entry charges.

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It is a Group Immediate Annuity Plan for Corporate Clients (ie.Employer-Employee
groups) and other Group Administrators. It provides Attractive Annuity rates due to group
effect. It also gives customized annuity options to customers. It gives the option to choose the
periodicity of annuity payment.

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It is a Participating yearly renewable traditional Group Gratuity Scheme. Under this
scheme, the contributions paid continue to accumulate on traditional platform of investments.
It also provides tax benefits.

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SBI Life provides two types of Superannuation schemes:
1. Defined Benefit Scheme: It defines the amount of benefit that an employee receives at
retirement.
2. Defined Contribution Scheme: It defines the annual contribution that the employer will
deposit into the scheme for each employee.

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It is a Non-Participating yearly renewable traditional group leave encashment scheme.
Under this scheme, the contributions paid continue to accumulate on traditional platform of
investments.

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It is a unique product that offers life cover, with an advantage of accumulating
savings at attractive rates, to group of persons who share a common identity or affinity
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SBI Life - Sampoorn Suraksha is a yearly renewable group term insurance plan which
provides life cover at comparatively lower premium than individual insurance to the groups
who are engaged in the similar kind of activities. It is available for both Formal and Informal
Groups.

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It is group term assurance non-participating plan. The Product provides cover at an
affordable premium due to the benefits of coverage of a wide section, and the administered
savings achieved. There is a possibility of profit sharing based on the mortality experience of
the group.

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Life cover available to employees irrespective of their Provident Fund Balance.
Lower premium rates are also available. No medical evidence is required and also there
accident death benefit.

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It is a Non Participating Group Term Insurance Plan. It is a simple and easy solution
to cover the cardholders of a bank/other Financing entity, through a Group Master Policy.

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It is a pure term life cover to protect the organization from adverse financial
consequences arising due to death of a key employee. The aim is to indemnify the company
for these losses and to allow for business continuity.

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It is a Non Participating Group Term Insurance Plan with Return of Premium. It is a
simple and easy solution which offers dual benefits of life cover protection in the event of
death and refund of premium in case of survival up to the end of the cover term.
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It provides decreasing term cover at a very low cost. Available for various types of
individual loans for borrowers of a lending institution through a Group Master Policy. There
is only one time payment of premium.

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It provides decreasing term cover at a very low cost. Available for various types of
individual loan for borrowers of a lending institution through a Group Master Policy. There is
Limited Premium Payment Term.

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It provides decreasing term cover at a very low cost. Available for various types of
individual loan for borrowers of a lending institution through a Group Master Policy. There
are two options for premium payment i.e. throughout the cover term or 2/3rd of the cover
term.

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It is a unique Plan which will help protect and grow the customers¶ savings. It is
offered to deposit holders of the master policyholder (bank/financial institution). It is a
transparent plan, where the benefit available at any point of time is clearly defined in the
Certificate of Insurance (COI) issued to the insured group member.

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The purpose of this product is to provide life insurance protection to the weaker
sections of the society. It is a Group Micro insurance product with refund of premiums at
maturity.

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The purpose of this Product is to provide life cover at low costs to groups of
economically weaker sections of Society. It is a low cost Group term assurance plan for rural
people who can seek life insurance protection without maturity benefit.
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SBI Life insurance, a joint venture between State Bank of India, the largest bank in
the country and bancassurance major Cardiff of France. SBI¶s stake in the venture is 74%
whereas Cardiff has 26% share. They have launched many products so far incorporating
certain features that are introduced for the first time in the country. SBI -Life is banking on
the bancassurance model on the strength of the SBI Groups 10000 plus bank branches and its
vast customer base. In addition it is also tapping other. banks corporate agents and the
traditional agency route to penetrate the insurance market SBI Life is planning to introduce
more novel and user friendly products to cater to the requirements of the consumers in
different segments.

SBI has the largest banking network in the county. The bank is looking for business
from every customer segment of the bank rural and urban segments, upper, middle and lower
income segments /groups and corporate segment. Besides their own channels they are
planning to distribute products through other interested banking channels also. It is expected
that 2/3 rd of the premium income in expected to come by way of bancassurance and the rest
from the traditional agency channel as well as ties up with corporate agents (Sundaram
Finance). SBI has also introduced group insurance to some well managed corporate staffs.

Technology is an integral part of this operation. Cardiff provided the technology

required. The project was initiated in April 2004, and the initial roll-out was completed by
August 2004. SBI Life has implemented an Internet-centric IT system with browser-based
frontoffice and back-office systems, channel management, policy product details, online
premium calculator and facility for group insurance customers to view their individual
savings status on the Web. The organization has the facility to pay premiums through credit
cards, Net banking, standing instructions, etc. This is fully integrated with the core systems
through industry standards such as XML, EDI, etc.

Even as it plans to scale up operations shortly, SBI Life Insurance Company Ltd is
looking at tripling its gross premium income in the new financial year. In 2007-08, SBI Life
earned a total premium income of Rs 5,622 crore, of which income from new policy sales
was Rs 4,800 crore. For the current financial year, their target is to achieve a total premium
income of Rs 10,500 crore and a first year premium income of Rs 8,500 crore´. The SBI Life
ranks second in terms of market share among private life insurers in the country.

SBI Life Insurance Company is the first among the 14 life insurance companies in
the private sector to post a net profit in 2005-06. There are life insurance players much more
aggressive than SBI and they have still not been able to break the record of SBI. Their
success is largely on the channel strategy and product strategy. The another aspect is their
superior investment performance. They have consistently, over the last two years, generated
11-12 per cent earnings from the investments.

SBI Life Insurance is uniquely placed as a pioneer to usher bancassurance into India.
The company hopes to extensively utilize the SBI Group as a platform for cross-selling
insurance products along with its numerous banking product packages such as housing loans,
personal loans and credit cards. SBI¶s access to over 100 million accounts provides a vibrant
base to build insurance selling across every region and economic strata in the country.

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i. Stiff competition
ii. High cost of agents
iii. Rural penetration
iv. Multi-channel distribution
v. Targeting middle income customers

For the new insurance players who started during the post- reform period in India,
bancassurance has come as a blessing in disguise. Getting a ready- made distribution network
at one shot and that too at a fraction of the total cost to develop a distribution network of their
own, enabled them to go aggressive on this channel. Companies like SBI life and Aviva have
reported over 65% of their businesses through bancassurance channel for the year 2004-05.

It is estimated that through bancassurance banks could collectively receive a fee-

based income of Rs. 13,500 crore and Rs. 22,000 crore over the next five year. Many banks
and financial institution have joint venture set up with foreign insurance companies.
Following are some of the bancassurance tie-ups in India:-

 
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Birla Sun Life Co. Ltd. Bank of Rajasthan, Andhra Bank, Bank of
Muscat, Development Credit Bank,
Deutsche Bank
Dabur CGU Life Insurance Company Pvt. Canara Bank, American Express Bank and
Ltd. ABN AMRO bank.
HDFC Standard Life Insurance Co. Ltd. Union Bank of India
 ICICI Prudential Life Isurance Co. Ltd
Life Insurance Corporation of India
Met Life India Insurance Co. Ltd.
SBI Life Insurance Company Ltd.
Bajaj Allianz general Insurance Co. Ltd.
National Insurance Co Ltd.
Royal Sundaram General Insurance Standard Chartered Bank, ABN AMRO
Company
United India Insurance Co. Ltd.
Lord Krishna Bank, ICICI Bank, Bank of
India, Citibank, Allahabad Bank, Federal
Bank.
Corporation Bank, Indian Overseas Bank,
Centurion Bank, Yeotmal Mahila Sahkari
Bank, Vijay Bank, Oriental Bank of
Commerce
Karnataka Bank, Dhanalakshmi Bank &
J& K Bank
State Bank of India
Karur Vysya Bank and Lord kishna Bank
City Union Bank
Bank, Citi Bank
South Indian Bank.

Banks have got a wide retail network, which can be exclusively used by there
insurance companies to sell their products. India¶s 27 public sector banks accounts for
approximately 92% of the total network. Among other things, the network involves 33000
rural branches and 14000 semi- urban branches where insurance penetration largely
untapped.

In this competitive world there are utilities of bancassurance for Bank & Insurance Company
which is as follows:

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Banks¶ traditional sources of fee income have been the fixed charges levied on loans and
advances, credit cards, merchant fee on point of sale transactions for debit and credit cards,
letter of credits and other operations. This kind of revenue stream has been more or less
steady over a period of time and growth has been fairly predictable. However shrinking
interest rate, growing competition and increased horizontal mobility of customers have forced
bankers to look elsewhere to compensate for the declining profit margins and Bancassurance
has come in handy for them. Fee income from the distribution of insurance products has
opened new horizons for the banks and they seem to love it. From the banks¶ point of view,
opportunities and possibilities to earn fee income via Bancassurance route are endless. A
typical commercial bank has the potential of maximizing fee income from Bancassurance up
to 50% of their total fee income from all sources combined. Fee Income from Bancassurance
also reduces the overall customer acquisition cost from the bank¶s point of view. At the end
of the day, it is easy money for the banks as there are no risks and only gains.

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In terms of products, there are endless opportunities for the banks. Simple term life
insurance, endowment policies, annuities, education plans, depositors¶ insurance and credit
shield are the policies conventionally sold through the Bancassurance channels. Medical
insurance, car insurance, home and contents insurance and travel insurance are also the
products which are being distributed by the banks. However, quite a lot of innovations have
taken place in the insurance market recently to provide more and more Bancassurance-centric
products to satisfy the increasing appetite of the banks for such products. Insurers who are
generally accused of being inflexible in the pricing and structuring of the products have been
responding too well to the challenges (say opportunities) thrown open by the spread of
Bancassurance. They are ready to innovate and experiment and have set up specialized
Bancassurance units within their fold. Examples of some new and innovative Bancassurance
products are income builder plan, critical illness cover, return of premium and Takaful
products which are doing well in the market. The traditional products that the

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Increased competition also makes it difficult for banks to retain their customers.
Banassurance comes as a help in this direction also. Providing multiple services at one place
to the customers means enhanced customer satisfaction. For example, through bancassurance
a customer gets home loans along with insurance at one single place as a combined product.
Another important advantage that bancassurance brings about in banks is development of
sales culture in their employees. Also, banking in India is mainly done in the 'brick and
mortar' model, which means that most of the customers still walk into the bank branches.
This enables the bank staff to have a personal contact with their customers. In a typical
Bancassurance model, the consumer will have access to a wider product mix - a rather
comprehensive financial services package, encompassing banking and insurance products.
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At present there are 15 life insurance companies and 14 general insurance companies in
India. Because of the Liberalization of the economy it became easy for the private insurance
companies to enter into the battle field which resulted in an urgent need to outwit one
another. Even the oldest public insurance companies started facing the tough competition.
Hence in order to compete with each other and to stay a step ahead there was a need for a
new strategy in the form of Bancassurance. It would also benefit the customers in terms of
wide product diversification.

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Insurers have been tuning into different modes of distribution because of the high cost of
the agencies services provided by the insurance companies. These costs became too much of
a burden for many insurers compared to the returns they generate from the business. Hence
there was a need felt for a Cost-Effective Distribution channel. This gave rise to
Bancassurance as a channel for distribution of the insurance products.

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Insurance industry has not been much successful in rural penetration of insurance so far.
People there are still unaware about the insurance as a tool to insure their life. However this
gap can be bridged with the help of Bancassurance. The branch network of banks can help
make the rural people aware about insurance and there is also a wide scope of business for
the insurers. In order to fulfill all the needs bancassurance is needed.

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Now a days the insurance companies are trying to exploit each and every way to sell the
insurance products. For this they are using various distribution channels. The insurance is
sold through agents, brokers through subsidiaries etc. In order to make the most out of India¶s
large population base and reach out to a worthwhile number of customers there was a need
for Bancassurance as a distribution model.
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In previous there was lack of awareness about insurance. The agents sold insurance
policies to a more upscale client base. The middle income group people got very less
attention from the agents. So through the venture with banks, the insurance companies can
recapture much of the under served market. So in order to utilize the database of the bank¶s
middle income customers, there was a need felt for Bancassurance.

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Following the issuance of Government of India Notification dated August 3, 2000,
specifying µInsurance¶ as a permissible form of business that could be undertaken by banks
under Section 6(1) (o) of The Banking Regulation Act, 1949, RBI issued the guidelines on
Insurance business for banks.
=c Any scheduled commercial bank would be permitted to undertake insurance business
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c Banks which satisfy the eligibility criteria given below will be permitted to set up a
joint venture company for undertaking insurance business with risk participation,
subject to safeguards. The maximum equity contribution such a bank can hold in the
Joint Venture Company will normally be 50% of the paid up capital of the insurance
company.
The eligibility criteria for joint venture participant are as under:
i.c The net worth of the bank should not be less than 166c;
ii.c The CRAR of the bank should not be c

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iv.c The bank should have
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v.c The track record of the performance of the subsidiaries, if any, of the
concerned bank should be .
c In cases where a foreign partner contributes +78c of the equity with the approval of
Insurance Regulatory and Development Authority/Foreign Investment Promotion
Board, more than one public sector bank or private sector bank may be allowed to
 participate in the equity of the insurance joint venture. As such participants will also
assume insurance risk, only those banks which satisfy the criteria given in paragraph 2
above, would be eligible.
(c A subsidiary of a bank or of another bank will not normally be allowed to join the
insurance company on c
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c Banks which are not eligible for µjoint venture¶ participant as above, can make
investments up to 68c of the net worth of the bank or 16c , whichever is
lower, in the insurance company for providing infrastructure and services support.
Such participation shall be treated as an investment and should be without any
contingent liability for the bank. The eligibility criteria for these banks will be as
under:
i. The =cof the bank should not be c

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!c All banks entering into insurance business will be required to obtain c"c
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. The Reserve Bank will give permission to banks on case to
case basis keeping in view all relevant factors including the position in regard to the
level of non-performing assets of the applicant bank so as to ensure that non-
performing assets do not pose any future threat to the bank in its present or the
proposed line of activity, @
, insurance business. It should be ensured that risks
involved in insurance business do not get transferred to the bank. There should be
µarms length¶ relationship between the bank and the insurance outfit.
^c Holding of equity by a promoter bank in an insurance company or participation in any
form in insurance business will be subject to compliance with any rules and
regulations laid down by the (=# 
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compliance with Section 7==c of the Insurance Act as amended by the (=c =4c
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prescribed period of time.
£c Latest audited balance sheet will be considered for reckoning the eligibility criteria.
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Insurance Executive to handle all the insurance matters & activities.

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go mandatory training at an institute determined (authorized) by IRDA & pass the
examination conducted by the authority.

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become corporate agents for one insurance company. Banks cannot become insurance
brokers.

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,c Certain regulatory barriers have slowed the development of
Bancassurance in India down. Which have only recently been cleared with the
passage of the insurance (amendment) Act 2002. Prior it was clearly an impractical
necessity and had held up the implementation of Bancassurance in the country. As the
current legislation places the following:-

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executive within the corporate agency, this barrier has effectively been removed.
Another regulatory change is published in recent publication of IRDA regulation
relating to the (B) Licensing of Corporate agents

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'c By selling the insurance product by their own channel the banker can increase their
income.
'c Banks have face-to-face contract with their customers. They can directly ask them to
take a policy. And the banks need not to go any where for customers.
'c The Bankers have extensive experience in marketing. They can easily attract
customers & non-customers because the customer & non-customers also bank on
banks.
'c Banks are using different value added services life-E. Banking tele banking, direct
mail & so on they can also use all the abovementioned facility for Bankassurance
purpose with customers & noncustomers.
'c Productivity of the employees increases.
'c By providing customers with both the services under one roof, they can improve
overall customer satisfaction resulting in higher customer retention levels.
'c Increase in return on assets by building fee income through the sale of insurance
products.
'c Can leverage on face-to-face contacts and awareness about the financial conditions of
customers to sell insurance products.
 'c Banks can cross sell insurance products E.g.: Term insurance products with loans.
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lc The Insurance Company can increase their business through the banking distribution
channels because the banks have so many customers.
lc By cutting cost Insurers can serve better to customers in terms lower premium rate
and better risk coverage through product diversification.
lc Insurers can exploit the banks' wide network of branches for distribution of products.
The penetration of banks' branches into the rural areas can be utilized to sell products
in those areas.
lc Customer database like customers' financial standing, spending habits, investment and
purchase capability can be used to customize products and sell accordingly.
lc Since banks have already established relationship with customers, conversion ratio of
leads to sales is likely to be high. Further service aspect can also be tackled easily.
lc The insurance companies can also get access to ATM¶s and other technology being
used by the banks.
lc The selling can be structured properly by selling insurance products through banks.
lc The product can be customized as per the needs of the customers.
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Rc Product innovation and distribution activities are directed towards the satisfaction of
needs of the customer.
Rc Bancassurance model assists customers in terms of reduction price, diversified
product quality in time and at their doorstep service by banks.
Rc Comprehensive financial advisory services under one roof. i.e., insurance services
along with other financial services such as banking, mutual funds, personal loans etc.
Rc Easy access for claims, as banks are a regular visiting place for customers.
Rc Innovative and better product ranges and products designed as per the needs of
customers.
Rc Any new insurance product routed through the bancassurance Channel would be well
received by customers.
 Rc Customers could also get a share in the cost savings in the form of reduced premium
rate because of economies of scope, besides getting better financial counseling at
single point.
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Rc Establish a low cost

Rc Revenue diversification
acquisition channel.

Rc More Profitable Rc Creation of Brand

resources utilization. Image.

Rc Establish sales Rc ùuicker Geographical

orientated culture. reach.

Rc Enrich work Rc Leverage service

environment. synergies with Bank.

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Traditionally, insurance products were promoted and sold principally through agency
systems only. The reliance of insurance industry was totally on the agents. Moreover with the
monopoly of public sector insurance companies there was very slow growth in the insurance
sector because of lack of competition. The need for innovative distribution channels was not
felt because all the companies relied only upon the agents and aggressive marketing of the
products was also not done. But with new developments in consumers¶ behaviours, evolution
of technology and deregulation, new distribution channels have been developed successfully
and rapidly in recent years. Recently Bancassurers have been making use of various
distribution channels, they are:

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Career Agents are full-time commissioned sales personnel holding an agency contract.
They are generally considered to be independent contractors. Consequently an insurance
company can exercise control only over the activities of the agent which are specified in the
contract. Many bancassurers, however avoid this channel, believing that agents might
oversell out of their interest in quantity and not quality. Such problems with career agents
usually arise, not due to the nature of this channel, but rather due to the use of improperly
designed remuneration and incentive packages.
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Special Advisers are highly trained employees usually belonging to the insurance partner,
who distribute insurance products to the bank's corporate clients. The Clients mostly include
affluent population who require personalised and high quality service. Usually Special
advisors are paid on a salary basis and they receive incentive compensation based on their
sales.

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Salaried Agents are an advantage for the bancassurers because they are under the control
and supervision of bancassurers. These agents share the mission and objectives of the
bancassurers. These are similar to career agents, the only difference is in terms of their
remuneration is that they are paid on a salary basis and career agents receive incentive
compensation based on their sales.

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Platform Bankers are bank employees who spot the leads in the banks and gently suggest
the customer to walk over and speak with appropriate representative within the bank. The
platform banker may be a teller or a personal loan assistant. A restriction on the effectiveness
of bank employees in generating insurance business is that they have a limited target market,
i.e. those customers who actually visit the branch during the opening hours.

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There are a number of banks who cooperate with independent agencies or brokerage
firms while some other banks have found corporate agencies. The advantage of such
arrangements is the availability of specialists needed for complex insurance matters and
through these arrangements the customers get good quality of services.

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In this channel no salesperson visits the customer to induce a sale and no face-to-face
contact between consumer and seller occurs. The consumer purchases products directly from
the bancassurer by responding to the company's advertisement, mailing or telephone offers.
This channel can be used for simple packaged products which can be easily understood by
the consumer without explanation.
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Internet banking is already securely established as an effective and profitable basis for
conducting banking operations. Bancassurers can feel confident that Internet banking will
also prove an efficient vehicle for cross selling of insurance savings and protection products.
Functions requiring user input (check ordering, what-if calculations, credit and account
applications) should be immediately added with links to the insurer. Such an arrangement can
also provide a vehicle for insurance sales, service and leads.

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Banks can open or acquire an e-Brokerage arm and sell insurance products from multiple
insurers. The changed legislative climate across the world should help migration of
bancassurance in this direction. The advantage of this medium is scale of operation, strong
brands, easy distribution and excellent synergy with the internet capabilities.

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One last method for developing bancassurance eyes involves "outside" lead generating
techniques, such as seminars, direct mail and statement inserts. Great opportunities await
bancassurance partners today and, in most cases, success or failure depends on precisely how
the process is developed and managed inside each financial institution.

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lc Though bancassurance has traditionally targeted the mass market, but bancassurers
have begun to finely segment the market, which has resulted in tailor-made products
for each segment.

lc Some bancassurers are also beginning to focus exclusively on distribution. In some

markets, face-to-face contact is preferred, which tends to favour bancassurance
development.

lc Nevertheless, banks are starting to embrace direct marketing and Internet banking as
tools to distribute insurance products. New and emerging channels are becoming
 increasingly competitive, due to the tangible cost benefits embedded in product
pricing or through the appeal of convenience and innovation.

lc Bancassurance proper is still evolving in Asia and this is still in infancy in India and it
is too early to assess the exact position. However, a quick survey revealed that a large
number of banks cutting across public and private and including foreign banks have
made use of the bancassurance channel in one form or the other in India.

lc Banks by and large are resorting to either µreferral models¶ or

µCorporate agency model¶ to begin with.

lc Banks even offer space in their own premises to accommodate the insurance staff for
selling the insurance products or giving access to their client¶s database for the use of
the insurance companies.

lc As number of banks in India have begun to act as µcorporate agents¶ to one or the
other insurance company, it is a common sight that banks canvassing and marketing
the insurance products across the counters.
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lc Increasing sales of non-life products, to the extent those risks are retained by the
banks, require sophisticated products and risk management. The sale of non-life
products should be weighted against the higher cost of servicing those policies.

lc Bank employees are traditionally low on motivation. Lack of sales culture itself is
bigger roadblock than the lack of sales skills in the employees. Banks are generally
used to only product packaged selling and hence selling insurance products do not
seem to fit naturally in their system.
lc Human Resource Management has experienced some difficulty due to such alliances
in financial industry. Poaching for employees, increased work-load, additional
training, maintaining the motivation level are some issues that has cropped up quite
occasionally. So, before entering into a bancassurance alliance, just like any merger,
cultural due diligence should be done and human resource issues should be adequately
prioritized.

lc Private sector insurance firms are finding µchange management¶ in the public sector, a
major challenge. State-owned banks get a new chairman, often from another bank,
almost every two years, resulting in the distribution strategy undergoing a complete
change. So because of this there is distinction created between public and private
sector banks.

lc The banks also have fear that at some point of time the insurance partner may end up
cross-selling banking products to their policyholders. If the insurer is selling the
products by agents as well as banks, there is a possibility of conflict if both the banks
and the agent target the same customers.

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By now, it has become clear that as economy grows it not only demands stronger
and vibrant financial sector but also necessitates to provide with more sophisticated and
variety of financial and banking products and services. The outlook for bancassurance
remains positive. While development in individual markets will continue to depend heavily
on each country¶s regulatory and business environment, bancassurers could profit from the
tendency of governments to privatize health care and pension liabilities.

India has already more than 200 million middle class population coupled with vast
banking network with largest depositors base, there is greater scope for use of bancassurance.
In emerging markets, new entrants have successfully employed bancassurance to compete
with incumbent companies. Given the current relatively low bancassurance penetration in
emerging markets, bancassurance will likely see further significant development in the
coming years.

In India the bancassurance model is still in its nascent stages, but the tremendous
growth and acceptability in the last three years reflects green pasture in future. The
deregulation of the insurance sector in India has resulted in a phase where innovative
distribution channels are being explored. In this phase, bancassurance has simply outshined
other alternate channels of distribution with a share of almost 25-30% of the premium income
amongst the private players.

To be fruitful, it is vital for bancassurance to ensure that banks remain fully

committed to promoting and distributing insurance products. This commitment has to come
from both senior management in terms of strategic inputs and the operations staff who would
provide the front-end for these products. In India, the signs of initial success are already
there despite the fact that it is a completely new phenomenon. There is no doubt that banks
are set to become a significant distributor of insurance related products and services in the
years to come.

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lc Although the concept is simple enough in theory, but in practice it has been found to
be far from straightforward.

lc Almost many people have a fair idea about Bancassurance and that their banks sell
various insurance products. But still few people don¶t know about Bancassurance as a
concept.

lc It has been also found out that the banks have various opportunities to cross sell
insurance products. The insurance companies also have the opportunity to take
advantage of the bank¶s network and other avenues.

lc It is also seen that customers have a lot of trust on the banks, and because of that trust
the customers will take the insurance products from banks.

lc As the brand name of the banks is important so is the brand image of the insurance
companies. So the banks and the insurance companies must tie-up with the right
partners. This will help them to create a better image in the minds of the customers.

lc It has also clear from the study that the private sector and the foreign banks have
better future in Bancassurance. But the public sector banks are also trying to give
them a tough competition e.g. SBI Life Insurance Co.

lc The insurance business can go a long way because there is a large population who is
still unaware about insurance. So the insurance companies have a huge potential
market in the years to come.

lc The banks fail to provide personalized services as are provided by the agents. So
banks will have to improve in that area. They should provide after sales services to the
customers.
 
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lc The Insurance companies need to design products specifically for distributing through
banks. Trying to sell traditional products may not work so effectively.

lc The employees of the banks who are selling insurance products must be given proper
training so that they can answer to any queries of the customers and can provide them
products according to their needs.

lc Banks should also provide after sales services and they should be more aggressive in
selling the insurance products.

lc Banks should also do the settlement of claims which will increase the trust and
reliability of the customers on the banks.

lc In India, since the majority of the banking sector is in public sector which has been
widely responsible for the lethargic attitude and poor quality of customer service, it
needs to rebuild the blemished image. Else, the bancassurance would be difficult to
succeed in these banks.

lc A formal and standard agreement between these banks and the insurance companies
should be taken up and drafted by a national regulatory body. These agreements must
have necessary clauses of revenue sharing. In case of possible conflicts, the bank
management and the management of the insurance company should be able to resolve
conflicts arising in future.

lc For bancassurance to succeed, products and processes will need to be tailored to bank
markets, rather than adjusted to insurer¶s specifications.

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The life Insurance Industry in India has been progressing at a rapid growth since
opening up of the sector. The size of country, a diverse set of people combined with
problems of connectivity in rural areas, makes insurance selling in India a very difficult task.
Life Insurance Companies require good distribution strength and tremendous man power to
reach out such a huge customer base.

The concept of Bancassurance in India is still in its nascent stage, but the tremendous
growth and the potential reflects a very bright future for bancassurance in India. With the
coming up of various products and services tailored as per the customers needs there is every
reason to be optimistic that bancassurance in India will play a long inning.

But the proper implementation of bancassurance is still facing so many hurdles

because of poor manpower management, lack of call centers, no personal contact with
customers, inadequate incentives to agents and unfullfilment of other essential requirements.

I have experienced a lot during the preparation of the project. I had just a simple idea
about Bancassurance. But after a detailed research in this topic I have found how important
bancassurance can be for bankers, insurers as well as the customers. I am contented that all
my objectives have been met to its fullest.

I have also experienced that though Bancassurance is not being utilized to its fullest but
it surely has a bright future ahead. India is at the threshold of a significant change in the way
insurance is perceived in the country. Bancassurance will definitely play a defining role as an
alternative distribution channel and will change the way insurance is sold in India.
 The bridge has been reached and many are beginning to walk those cautious steps
across it. Bancassurance in India has just taken a flying start. It has a long way to go «««..
after all The SKY IS THE LIMIT!

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(a) Male [ ]

(b) Female [ ]

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(b) No [ ]

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