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 “BANCASSURANCE (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.
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. This project is just a gist about how the Globalization, Liberalization and tough Competition have brought the Banking as well as the Insurance Industries together to help each other and to provide excellent services to the customers.
History of Banking in India. 1. Definition 2. History
History of Insurance in India 1. Definition 2. History
Introduction to Banking
Banking as per the Banking Regulation Act, Banking is defined as: -
“accepting 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
Introduction to Insurance Sector
Insurance may be defined as: -
“It 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. The market focus is shifting from mass banking products to class banking with the introduction of value added and customized products. The insurance sector is a colossal one and is growing at a speedy rate of 15-20%. 1938 was the first legislation governing all forms of insurance to provide strict state control over insurance business. But today also the insurance companies are trying to capture Indian markets as not many people are aware of it. 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. insurance has a deep-rooted history.CE
become one-stop financial supermarkets.”
In India. Insurance in India has evolved over time heavily drawing from other countries. 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.Today there are 14 general insurance companies and 14 life insurance companies operating in the country. insurance
. England in particular. Together with banking services. The Insurance Act.
term funds for infrastructure development at the same time strengthening the risk taking ability of the country. A well-developed and evolved insurance sector is a boon for economic development as it provides long.CE
services add about 7% to the country’s GDP. Origin 3. Bank Referrals
Structural classification Product based classification
ii. Models of Bancassurance i. Meaning 2.
Chapter 2 About Bancassurance 1.
To put it simply. was thought of as a potential distribution channel. banking sector with it's far and wide reach. Since the banking services. Bancassurance.CE
What is BANCASSURANCE?
With the opening up of the insurance sector and with so many players entering the Indian insurance industry. With the increased competition and squeezing of interest rates spread. companies are forced to come up with innovative techniques to market their products and services. selling of insurance by banks would be mutually beneficial for banks and insurance companies. insurance and fund management are all interrelated activities and have inherent synergies.
Bancassurance is the distribution of insurance products through the
bank's distribution channel. it is required by the insurance companies to come up with innovative products. useful for the insurance companies. create more consumer awareness about their products and offer them at a competitive price. At this juncture. 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. tries to exploit synergies between both the insurance companies and banks. With these developments and increased pressures in combating competition. This union of the two sectors is what is known as Bancassurance.
. Fee based income can be increased through hawking of risk products like insurance. Bancassurance can be important source of revenue. profits are likely to be under pressure.
France taking the lead. In India. and Australia.
Models of Bancassurance
I. banks. banks started the process of selling life insurance decades ago and customers found the concept appealing for various reasons. Referral model is nothing but a simple arrangement. It is also developing in Canada. while controlling access to the
. followed by Germany. UK.CE
Bancassurance if taken in right spirit and implemented properly can be win-win situation for the all the participants' viz. In USA the practice was late to start (in 90s).. Germany took the lead and it was called “ALLFINANZ”. Across Europe in countries like Spain and UK. The system of bancassurance was well received in Europe. Spain etc. With the liberalization and deregulation of the insurance industry. bancassurance evolved in India around 2002. Mexico. wherein the bank. Structural Classification
a) Referral Model
Banks intending not to take risk could adopt ‘referral model’ wherein they merely part with their client data base for business lead of commission.
The banks taking over insurance is particularly well-documented with reference to the experience in Europe. insurers and the customer. the concept of Bancassurance is very new. 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.
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. This model of bancassurance worked well in the US. the fully integrated financial service involves much more comprehensive and intricate relationship between insurer and bank. This may be suitable to relatively larger banks with sound financials and has better infrastructure. however. however. is prone to reputational risk of the marketing bank. parts with only the business leads to the agents/ sales staff of insurance company for a ‘referral fee’ or commission for every business lead that was passed on. This includes banks having wholly owned insurance subsidiaries with or without foreign participation.
c) Insurance as Fully Integrated Financial Service/ Joint ventures
Apart from the above two. This. be overcome by intensive training to chosen staff. In fact a number of banks in India have already resorted to this strategy to begin with.
b) Corporate Agency
The other form of non-sick participatory distribution channel is that of ‘Corporate Agency’. There are also practical difficulties in the form of professional knowledge about the insurance products. banks to begin with can resort to this model and then move on to the other models.CE
clients data base.
. 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. where the bank functions as fully universal in its operation and selling of insurance products is just one more function within. For. 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 could. because consumers generally prefer to purchase policies through broker banks that offer a wide range of products from competing insurers. 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. There is greater scope in the medium term for this model.
Many banks in India.
Blend of Insurance with Bank Products
This method aims at blending of insurance products as a ‘value addition’ while promoting the bank’s own products. 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.
II. etc. education loans. 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. have also been packaged with the insurance cover as an additional incentive. however. Thus. etc..
III. this type of bancassurance seems to have emerged out of necessity in India to an extent. whereas the cardholders get the ‘insurance cover’ for a nominal fee or (implicitly included in the annual fee) free from explicit charges/ premium. e. Product based classification
(a) Stand-alone Insurance Products
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. In most times. has been aggressively marketing credit and debit card business. housing loans. therefore.CE
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.. the products of banks and insurance will have their respective brands too. credit card. Insurance is sold as one more item in the menu of products offered to the bank’s customer. in recent years. banks could sell the insurance products without any additional efforts.g. Bank Referrals
. Similarly the home loans / vehicle loans.
In this method also there is a win-win situation every where as the banks get commission. ii. Building close relations with the customers
2. Stiff competition High cost of agents Rural penetration Multi-channel distribution Targeting middle income customers
. For Insurance Companies i. they only give the database to the insurance companies. That is called referral basis.
Utilities of Bancassurance
1. iii. Here the banks do not issue the policies. As a source of fee based income ii.CE
There is also another method called 'Bank Referral'. Product diversification iii. For Banks: i. The companies issue the policies and pay the commission to them. v. iv. the insurance companies get databases of the customers and the customers get the benefits.
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. merchant fee on point of sale transactions for debit and credit cards. 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. This kind of revenue stream has been more or less steady over a period of time and growth has been fairly predictable. Fee Income from Bancassurance also reduces the overall
. Fee income from the distribution of insurance products has opened new horizons for the banks and they seem to love it.CE
As a source of fee income
Banks’ traditional sources of fee income have been the fixed charges levied on loans and advances. However shrinking interest rate. credit cards. From the banks’ point of view. opportunities and possibilities to earn fee income via Bancassurance route are endless. letter of credits and other operations.
critical illness cover. However. They are ready to innovate and experiment and have set up specialized Bancassurance units within their fold. Banassurance comes as a help in this direction also.CE
customer acquisition cost from the bank’s point of view.
Product Diversification In terms of products. depositors’ insurance and credit shield are the policies conventionally sold through the Bancassurance channels. annuities. Also. Another important advantage that bancassurance brings about in banks is development of sales culture in their employees. through bancassurance a customer gets home loans along with insurance at one single place as a combined product. it is easy money for the banks as there are no risks and only gains. the consumer will have access to a wider product mix . Examples of some new and innovative Bancassurance products are income builder plan. In a typical Bancassurance model. 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. 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. home and contents insurance and travel insurance are also the products which are being distributed by the banks. Providing multiple services at one place to the customers means enhanced customer satisfaction. education plans.
. This enables the bank staff to have a personal contact with their customers. which means that most of the customers still walk into the bank branches. Simple term life insurance. car insurance.a rather comprehensive financial services package. The traditional products that the
Building close relations with the customers
Increased competition also makes it difficult for banks to retain their customers. At the end of the day. banking in India is mainly done in the 'brick and mortar' model. For example. encompassing banking and insurance products. endowment policies. there are endless opportunities for the banks. Medical insurance. return of premium and Takaful products which are doing well in the market.
For Insurance Companies
Stiff Competition 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. These costs became too much of a burden for many
High cost of agents Insurers have been tuning into different modes of distribution because of the high cost of the agencies services provided by the insurance companies. It would also benefit the customers in terms of wide product diversification. 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.
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.
Multi channel Distribution Now a days the insurance companies are trying to exploit each and every way to sell the insurance products. The middle income group people got very less attention from the agents. the insurance companies can recapture much of the under served market. 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.
Rural Penetration Insurance industry has not been much successful in rural penetration of insurance so far. there was a need felt for Bancassurance. So in order to utilize the database of the bank’s middle income customers. However this gap can be bridged with the help of Bancassurance.
Targeting Middle income Customers
In previous there was lack of awareness about insurance. brokers through subsidiaries etc. People there are still unaware about the insurance as a tool to insure their life. In order to fulfill all the needs bancassurance is needed. This gave rise to Bancassurance as a channel for distribution of the insurance products. The insurance is sold through agents.
. Hence there was a need felt for a Cost-Effective Distribution channel. For this they are using various distribution channels. So through the venture with banks.CE
insurers compared to the returns they generate from the business. The agents sold insurance policies to a more upscale client base.
IRDA Norms for Insurance companies tying up with Banks
Chapter 4 Regulations for Bancassurance in India 1. RBI Norms for banks entering into Insurance sector 2.
RBI issued the guidelines on Insurance business for banks. 1 Any scheduled commercial bank would be permitted to undertake insurance business as agent of insurance companies on fee basis. 1949. Without any risk participation
. specifying ‘Insurance’ as a permissible form of business that could be undertaken by banks under Section 6(1) (o) of The Banking Regulation Act.CE
RBI Norms for banks
RBI Guidelines for the Banks to enter into Insurance Business
Following the issuance of Government of India Notification dated August 3. 2000.
A subsidiary of a bank or of another bank will not normally be allowed to join the insurance company on risk participation basis.50 crore. iii. The eligibility criteria for these banks will be as under: i. ii. would be eligible. 6. subject to safeguards. The track record of the performance of the subsidiaries. only those banks which satisfy the criteria given in paragraph 2 above. 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
2. iv. The eligibility criteria for joint venture participant are as under: i. The level of NPAs should be reasonable. whichever is lower. 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. 4. In cases where a foreign partner contributes 26% of the equity with the approval of Insurance Regulatory and Development Authority/Foreign Investment Promotion Board. Such participation shall be treated as an investment and should be without any contingent liability for the bank. As such participants will also assume insurance risk. The net worth of the bank should not be less than Rs. more than one public sector bank or private sector bank may be allowed to participate in the equity of the insurance joint venture. iii. in the insurance company for providing infrastructure and services support. 5. 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. v. The bank should have net profit for the last three consecutive years. The level of non-performing assets should be reasonable.500 crore. The bank should have net profit for the last three consecutive years. can make investments up to 10% of the net worth of the bank or Rs. ii. All banks entering into insurance business will be required to obtain prior approval of the Reserve Bank. The CRAR of the bank should not be less than 10%. The CRAR of the bank should not be less than 10 per cent. of the concerned bank should be satisfactory. Banks which are not eligible for ‘joint venture’ participant as above. 3. if any.
It should be ensured that risks involved in insurance business do not get transferred to the bank. 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 IRDA/Central Government. viz.
IRDA Norms for Insurance Companies
The Insurance regulatory development & Authority has given certain guidelines for the Bancassurance they are as follows: 1) Chief Insurance Executive: Each bank that sells insurance must have a chief Insurance Executive to handle all the insurance matters & activities. There should be ‘arms length’ relationship between the bank and the insurance outfit.
. 1999. for divestment of equity in excess of 26 per cent of the paid up capital within a prescribed period of time. Latest audited balance sheet will be considered for reckoning the eligibility criteria. 2) Mandatory Training: All the people involved in selling the insurance should under-go mandatory training at an institute determined (authorized) by IRDA & pass the examination conducted by the authority. insurance business.. 7.CE
not pose any future threat to the bank in its present or the proposed line of activity. 8. This will include compliance with Section 6AA of the Insurance Act as amended by the IRDA Act.
4) Banks cannot become insurance brokers. Prior it was clearly an impractical necessity and had held up the implementation of Bancassurance in the country. this barrier has effectively been removed. Which have only recently been cleared with the passage of the insurance (amendment) Act 2002. Issues for regulation: Certain regulatory barriers have slowed the development of Bancassurance in India down. To Banks 2. To Customers
Chapter 5 Benefits of Bancassurance 1. To Insurance companies 3.CE
3) Corporate agents: Commercial banks. Another regulatory change is published in recent publication of IRDA regulation relating to the (2) Licensing of Corporate agents (2) Specified person to satisfy the training & examination: According to new regulation of IRDA only the specific persons have to satisfy the training & examination requirement as insurance agent. including co-operative banks and RRBs may become corporate agents for one insurance company. As the current legislation places the following:1) Training and examination requirements: upon the corporate insurance executive within the corporate agency.
. They can directly ask them to take a policy. (B) Banks have face-to-face contract with their customers. And the banks need not to go any where for customers.CE
From the banks point of view:
(A)By selling the insurance product by their own channel the banker can increase their income.
direct mail & so on they can also use all the abovementioned facility for Bankassurance purpose with customers & noncustomers. they can improve overall customer satisfaction resulting in higher customer retention levels. (F) By providing customers with both the services under one roof.: Term insurance products with loans. (E) Productivity of the employees increases.CE
(C) The Bankers have extensive experience in marketing. Banking tele banking. They can easily attract customers & non-customers because the customer & non-customers also bank on banks. (H) Can leverage on face-to-face contacts and awareness about the financial conditions of customers to sell insurance products.
From the Insurer Point of view:
(A) The Insurance Company can increase their business through the banking distribution channels because the banks have so many customers. (G) Increase in return on assets by building fee income through the sale of insurance products. (I) Banks can cross sell insurance products E. (D) Banks are using different value added services life-E.g.
(G)The selling can be structured properly by selling insurance products through banks. (C)Insurers can exploit the banks' wide network of branches for distribution of products. spending habits.CE
(B) By cutting cost Insurers can serve better to customers in terms lower premium rate and better risk coverage through product diversification. (E)Since banks have already established relationship with customers. (F)The insurance companies can also get access to ATM’s and other technology being used by the banks. (H) The product can be customized as per the needs of the customers. The penetration of banks' branches into the rural areas can be utilized to sell products in those areas.
From the customers' point of view:
(A) Product innovation and distribution activities are directed towards
the satisfaction of needs of the customer. Further service aspect can also be tackled easily. (D)Customer database like customers' financial standing. conversion ratio of leads to sales is likely to be high.
. investment and purchase capability can be used to customize products and sell accordingly.
besides getting better financial counseling at single point. personal loans etc. (G) Customers could also get a share in the cost savings in the form of reduced premium rate because of economies of scope. insurance services along with other financial services such as banking. Career agents
.e. (D) Easy access for claims. i. (F)Any new insurance product routed through the bancassurance Channel would be well received by customers. as banks are a regular visiting place for customers.
1. (C)Comprehensive financial advisory services under one roof. . diversified product quality in time and at their doorstep service by banks. mutual funds.CE
(B) Bancassurance model assists customers in terms of reduction price.. (E) Innovative and better product ranges and products designed as per the needs of customers.
The need for innovative distribution channels was not felt because all the companies relied only
. Moreover with the monopoly of public sector insurance companies there was very slow growth in the insurance sector because of lack of competition. Direct response 7. Internet 8. Special advisers 3.Brokerage 9. Corporate agency & Brokerage firm 6. Outside lead generating techniques
Traditionally. The reliance of insurance industry was totally on the agents. Salaried agents 4. Bank employees 5.CE
2. E. insurance products were promoted and sold principally through agency systems only.
They are generally considered to be independent contractors. Recently Bancassurers have been making use of various distribution channels.
. Consequently an insurance company can exercise control only over the activities of the agent which are specified in the contract. believing that agents might oversell out of their interest in quantity and not quality. Usually Special advisors are paid on a salary basis and they receive incentive compensation based on their sales. But with new developments in consumers’ behaviours. new distribution channels have been developed successfully and rapidly in recent years. Such problems with career agents usually arise. they are:
Career Agents are full-time commissioned sales personnel holding an agency contract. These agents share the mission and objectives of the bancassurers.CE
upon the agents and aggressive marketing of the products was also not done.
Special Advisers are highly trained employees usually belonging to the insurance partner. 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. who distribute insurance products to the bank's corporate clients. These are similar to career agents. however avoid this channel. evolution of technology and deregulation.
Salaried Agents are an advantage for the bancassurers because they are under the control and supervision of bancassurers. not due to the nature of this channel. The Clients mostly include affluent population who require personalised and high quality service. but rather due to the use of improperly designed remuneration and incentive packages. Many bancassurers.
A restriction on the effectiveness of bank employees in generating insurance business is that they have a limited target market.
. The platform banker may be a teller or a personal loan assistant. This channel can be used for simple packaged products which can be easily understood by the consumer without explanation. 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.CE
Bank Employees / Platform Banking:
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. i. The consumer purchases products directly from the bancassurer by responding to the company's advertisement.e.
In this channel no salesperson visits the customer to induce a sale and no face-to-face contact between consumer and seller occurs. mailing or telephone offers. those customers who actually visit the branch during the opening hours.
Corporate Agencies and Brokerage Firms:
There are a number of banks who cooperate with independent agencies or brokerage firms while some other banks have found corporate agencies.
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.
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.
Outside Lead Generating Techniques:
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.
SBI Life Insurance (profile)
SBI Life Insurance (perspective)
State bank of India Life Insurance
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.
Products Offered by SBI
A. Unit Linked products: 1) SBI Life - Horizon II:
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
2) SBI Life - Unit Plus II:
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
3) SBI life- unit plus child plan:
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.
2) SBI Life .Immediate Annuity:
. SBI Life . don’t need to be an expert to grow your money. The policyholder also has the option of withdrawing a lump sum amount up to particular limit.Lifelong Pensions:
It is a pension plan wherein the policyholder gets the flexibility to meet the post retirement financial needs. They can choose to pay either single premium or pay regular premium for the entire policy term.
1) SBI Life . It comes with the unique feature of Automatic Asset Allocation by means of which you truly. retired life.CE 4) SBI Life – Unit Plus Elite:
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. It also provides tax benefits. Pension Products
SBI Life .Horizon II Pension:
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.Horizon II Pension is a safe and hassle free way to get high returns. Their contributions are invested into 4 fund options as per their choice.
3) SBI Life .
B.Unit Plus II Pension:
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.
Tax benefit is also provided. This product provides annuity payments immediately from payment of purchase price. The SBI Life Insurance provides “SBI Life – Shield” as a Keyman Insurance Policy. As per IRDA circular only Pure Term Assurance Products may be used as a Keyman Insurance. SBI Life Unit Plus II Pension) at the vesting age.Swadhan:
This is a Traditional Term Assurance Policy with guaranteed refund of basic premium . Pure Protection Products
SBI Life . Protection cum Savings Products
C. There is also flexible benefit premium paying mode.Immediate Annuity Plan is introduced for Pension Policyholders.
D.Life cover is provided at no cost.
SBI Life – Shield as a Keyman Insurance Policy:
A Keyman insurance policy is taken to protect the organization against the reduction in profit resulting from the death of the Keyman.Lifelong Pensions. Tax benefit is also provided.Horizon II Pension.CE
SBI Life .Shield:
It offers the customers with the life insurance cover at the lowest cost for a selected term. It has been specially designed to cater to the annuity needs of existing policyholders (SBI Life . There is also rebate on modes of premium payment. SBI Life .
SBI Life . There is also a rebate on high sum assured.
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. At the same time. Thus at the end of the plan.Scholar II:
Twin benefit of saving for the child's education and securing a bright future despite the uncertainties of life.
SBI Life . They can save regularly for the future.
.Sudarshan is an Endowment Policy designed to provide savings and protection to the policyholder and their family. The plan has a number of money back options specially suited to the customers needs. his family will be protected for death risk for the full Sum Assured. The cover is available at competitive premium rates. he will receive a substantial amount of savings along with the accumulated bonuses declared.Money Back:
It is a Traditional Saving Plan with added advantage of life cover and guaranteed cash inflow at regular intervals.CE
SBI Life – Sudarshan:
SBI Life .
SBI Life . Money back scheme products
SBI Life . Option to receive the installments in lump sum at the due date of first installment of Survival benefit.
It is a simple Unit Linked Non-Participating Insurance
Plan. For Brokers:
1) SBI Life .CE
F. an investment income earned on your contributions is credited to your gratuity fund account. The sum assured is based on Term and Premium amount. 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
. the contributions paid continue to accumulate on traditional platform of investments and at the end of the financial year. Retirement Solutions:
1) SBI Life . Under this scheme.
A.CapAssure Gratuity Scheme:
It is a Non-Participating yearly renewable traditional Group Gratuity Scheme. Group Employee Benefit Products
I.CapAssure Superannuation Scheme:
It is a Non-Participating yearly renewable traditional group superannuation scheme.
2) SBI Life . There is also flexibility to increase or decrease regular premium and it also provides tax benefits.
Under this scheme. on his resignation. death whilst in service. the contributions paid continue to accumulate on traditional platform of investments and at the end of the financial year. Along
with managing the gratuity fund a life cover on the employee’s life protect their family financially in case of unfortunate event. It also provides protection at low cost with no medical examination and also hassle free joining process with no entry charges. permanent total disability whilst in service.
5) SBI Life .Dhanrashi: It is a traditional non participating Group Savings Linked
benefit.Group Immediate Annuity:
It is a scheme wherein life annuity is payable at a constant rate through out the life time.CapAssure Leave Encashment Scheme:
It is a Non-Participating yearly renewable traditional group leave encashment scheme. an investment income earned on your contributions is credited to your CA-LE fund account. retirement.Golden Gratuity: It is a yearly renewable unit linked group gratuity plan. It has attractive returns on savings with twin benefits.
4) SBI Life . Employees can choose the periodicity of the annuity depending upon the needs.
6) SBI Life . defined as per the scheme rules.
3) SBI Life .
7) SBI Life . This scheme is applicable for both employer-employee and non-employer employee groups.Swarna Jeevan:
the contributions paid continue to accumulate on traditional platform of investments. Defined Contribution Scheme: It defines the annual contribution that the employer will deposit into the scheme for each employee.CE
BANCASSURAN It is a Group Immediate Annuity Plan for Corporate Clients
(ie.Group Superannuation Scheme:
SBI Life provides two types of Superannuation schemes: 1.
10) SBI Life provides SBI Life . Defined Benefit Scheme: It defines the amount of benefit that an employee receives at retirement.Group Leave Encashment cum Life Cover Scheme:
It is a Non-Participating yearly renewable traditional group leave encashment scheme. It also provides tax benefits.Employer-Employee groups) and other Group Administrators.Group Gratuity cum Life Cover Scheme:
It is a Participating yearly renewable traditional Group Gratuity Scheme.SWARNA GANGA:
It is a unique product that offers life cover.
11) SBI Life . Under this scheme.
8) SBI Life . Under this scheme. 2. to group of persons who share a common identity or affinity
. It gives the option to choose the periodicity of annuity payment. with an advantage of accumulating savings at attractive rates. the contributions paid continue to accumulate on traditional platform of investments. It provides Attractive Annuity rates due to group effect.
9) SBI Life . It also gives customized annuity options to customers.
and the administered savings achieved. Specialized Term Insurance
SBI Life .
3) SBI Life .
4) SBI Life .CE
2) SBI Life – Super Suraksha: It is group term assurance non-participating plan. It is a simple and easy solution to cover the cardholders of a bank/other Financing entity. The Product
provides cover at an affordable premium due to the benefits of coverage of a wide section. Group Protection Plans
1) SBI Life . through a Group Master Policy. Lower premium rates are also available. It is available for both Formal and Informal Groups.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.Super Suraksha in Lieu of EDLI:
Life cover available to employees irrespective of their Provident Fund Balance. No medical evidence is required and also there accident death benefit. There is a possibility of profit sharing based on the mortality experience of the group.
It is a Non Participating Group Term Insurance Plan.
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.Dhanaraksha Plus SP:
It provides decreasing term cover at a very low cost.Shield used as Keyman:
It is a pure term life cover to protect the organization from adverse financial consequences arising due to death of a key employee.Swadhan (Group):
It is a Non Participating Group Term Insurance Plan with Return of Premium. Available for various types of individual loans for borrowers of a lending institution
1) SBI Life . The aim is to indemnify the company for these losses and to allow for business continuity.
B. Group Term with ROP:
1) SBI Life . Group Loan Protection Products
1) SBI Life .
Group Savings Protection
1) SBI Life . It is a transparent plan. Available for various types of individual loan for borrowers of a lending institution through a Group Master Policy.e. throughout the cover term or 2/3rd of the cover term.Dhanaraksha Plus LPPT:
It provides decreasing term cover at a very low cost.CE
through a Group Master Policy. There are two options for premium payment i.
D. Available for various types of individual loan for borrowers of a lending institution through a Group Master Policy.Nidhi Raksha RP:
It is a unique Plan which will help protect and grow the customers’ savings. There is only one time payment of premium. It is offered to deposit holders of the master policyholder (bank/financial institution).
E. Group Micro Insurance
. There is Limited Premium Payment Term. where the benefit available at any point of time is clearly defined in the Certificate of Insurance (COI) issued to the insured group member.
2) SBI Life .
3) SBI Life .Dhanaraksha Plus RP:
It provides decreasing term cover at a very low cost.
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. the largest bank in the country and bancassurance major Cardiff of France. SBI -Life is banking on the bancassurance model on the strength of the SBI Groups 10000 plus bank branches and its vast customer base.CE 1) SBI Life . SBI has the largest banking network in the county.Grameen Shakti:
The purpose of this product is to provide life insurance protection to the weaker sections of the society. Besides their own channels they are planning to distribute products through other interested banking channels also. In addition it is also tapping other. SBI’s stake in the venture is 74% whereas Cardiff has 26% share.
2) SBI Life . upper. It is a low cost Group term assurance plan for rural people who can seek life insurance protection without maturity benefit. The bank is looking for business from every customer segment of the bank rural and urban segments.Grameen Super Suraksha:
The purpose of this Product is to provide life cover at low costs to groups of economically weaker sections of Society. They have launched many products so far incorporating certain features that are introduced for the first time in the country. a joint venture between State Bank of India.
SBI Life Insurance Company (perspective)
SBI Life insurance. middle and lower income segments /groups and corporate segment. It is a Group Micro insurance product with refund of premiums at maturity. It is expected that 2/3 rd of the premium income in expected to come by way
policy product details.
SBI Life Insurance is uniquely placed as a pioneer to usher bancassurance into India. They have consistently.622 crore. over the last two years. Cardiff provided the technology required. The another aspect is their superior investment performance.CE
of bancassurance and the rest from the traditional agency channel as well as ties up with corporate agents (Sundaram Finance). The project was initiated in April 2004. For the current financial year. etc. 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. SBI Life has implemented an Internet-centric IT system with browser-based frontoffice and back-office systems. online premium calculator and facility for group insurance customers to view their individual savings status on the Web. Technology is an integral part of this operation. generated 11-12 per cent earnings from the investments. 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. Net banking. EDI.500 crore”. SBI Life Insurance Company Ltd is looking at tripling its gross premium income in the new financial year. etc.
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. SBI Life earned a total premium income of Rs 5. personal
. This is fully integrated with the core systems through industry standards such as XML. their target is to achieve a total premium income of Rs 10. SBI has also introduced group insurance to some well managed corporate staffs.800 crore. of which income from new policy sales was Rs 4. standing instructions. and the initial roll-out was completed by August 2004.
Even as it plans to scale up operations shortly. The organization has the facility to pay premiums through credit cards.500 crore and a first year premium income of Rs 8. In 2007-08. The SBI Life ranks second in terms of market share among private life insurers in the country. channel management.
Various Trends Challenges
. 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.CE
loans and credit cards.
face-to-face contact is preferred.
but bancassurers have begun to finely segment the market. In some markets. which tends to favour bancassurance development.
Some bancassurers are also beginning to focus exclusively on
distribution. banks are starting to embrace direct marketing and Internet banking as tools to distribute insurance products. which has resulted in tailor-made products for each segment. due to
. New and emerging channels are becoming increasingly competitive. Nevertheless.CE
Though bancassurance has traditionally targeted the mass market.
Increasing sales of non-life products. 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. to the extent those risks are
retained by the banks.
. require sophisticated products and risk management. it is a common sight that banks canvassing and marketing the insurance products across the counters. The sale of non-life products should be weighted against the higher cost of servicing those policies.
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.
As number of banks in India have begun to act as ‘corporate
agents’ to one or the other insurance company.CE
the tangible cost benefits embedded in product pricing or through the appeal of convenience and innovation.
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.
Banks by and large are resorting to either ‘referral models’ or
‘Corporate agency model’ to begin with.
Human Resource Management has experienced some difficulty due to such alliances in financial industry. Poaching for employees.
SWOT Analysis 1. a major challenge. increased work-load. just like any merger. additional training. maintaining the motivation level are some issues that has cropped up quite occasionally. resulting in the distribution strategy undergoing a complete change. 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. The banks also have fear that at some point of time the insurance partner may end up cross-selling banking products to their policyholders.
Private sector insurance firms are finding ‘change management’ in
the public sector. before entering into a bancassurance alliance. State-owned banks get a new chairman.CE
Bank employees are traditionally low on motivation. So. Banks are generally used to only product packaged selling and hence selling insurance products do not seem to fit naturally in their system. cultural due diligence should be done and human resource issues should be adequately prioritized. almost every two years. often from another bank. Strengths
. Lack of sales
culture itself is bigger roadblock than the lack of sales skills in the employees. So because of this there is distinction created between public and private sector banks.
Banks can straightaway leverage their existing capabilities in
. Even though. Weaknesses 3. Banks have less risk but the insurance has a greater risk.CE
2. Banks are selling Personal Accident and Baggage Insurance directly to their Credit Card members as a value addition to their products. Threats
Banking and Insurance are very different businesses. banks and insurance companies in India are yet to exchange their wedding rings. Bancassurance as a means of distribution of insurance products is already in force in some form or the other. Opportunities 4.
. Banks have the credibility established with their constituents because of a variety of services and schemes provided by them. one of the major strategic gains from implementing bancassurance successfully is the development of a sales culture within the bank. This can be used by the bank to promote traditional banking products and other financial services as well.CE
terms of database and face-to face contact to market insurance products to generate some income for themselves. Bancassurance enables banks and insurance companies to complement each other’s strengths as well. A SWOT analysis of Bancassurance is given below:
In a country like India of one billion people where sky is the limit
there is a vast untapped potential waiting for life insurance products. The sale of insurance products can earn banks very significant commissions (particularly for regular premium products). which previously was not thought of. In addition. It is therefore essential to have a SWOT analysis done in the context of bancassurance experiment in India. Our other strength lies in a huge pool of skilled professionals whether it is banks or insurance companies who may be easily relocated for any bancassurance venture.
Because of this the bankers can guess the attitude and diverse needs of the customers and could change the face of insurance distribution to personal line insurance. The IT culture is unfortunately missing completely in all of the future collaborations. as the population of India is high and a large part of it has remained untapped till now.
. The internet connections are also not properly provided to the staff. With the help of banks trained staff. Banks are very well aware with the psychology of the customers because of their interaction with the customers on regular basis. So this can create an added advantage for both banks and insurers. its brand name and the confidence and reliability of people on the banks. simultaneously. the selling of insurance products can be done in a more proper way. the rural and semi-urban banks have still to see information technology as an enabler. People rely more upon LIC and GIC for taking insurance.CE
They also enjoy pride of place in the hearts of people because of their long presence and sustained image.
In spite of growing emphasis on total branch mechanism and full computerization of bank branches. even in the remotest areas that can facilitate taking up the task on a large and massive scale.
Banks also enjoy a wide network of branches. Other than all these things there is a huge potential for insurance sector. If the products of LIC and GIC are provided through bancassurance it would be an added advantage to the insurance companies.
Moreover the standards of the examination have been raised in the recent past making it difficult for many examinees to clear the same.e. There are more than 900 million lives waiting to be given a life cover (total number of individual life policies sold in 1998-99 was just 91. Also.
There is a vast untapped potential waiting to be mined particularly for life insurance products. it cannot be tailor made to the requirements of the customer.CE
To undertake the distribution of the insurance products. followed by a test and then get themselves licensed. There is lack of personalized services because the traditional insurance agent is considered a member of the family and hence is able to render a personalized service during and after the sales process. For a bancassurance venture to succeed it is extremely essential to have in-built flexibility so as to make the product attractive to the customers. Another drawback is the inflexibility of the products i. However that may not be the case in regards to a bank employee. Banks are traditionally “demand-driven” organizations with a reactive selling philosophy. the visits in urban or metro branches are going to be fewer because of ATM’s and e-banking. Busy customers will have no time to have a discussion on a long-term durable purchase like insurance across the counter. The visit of a customer to the bank is to have a simple transaction like deposit or withdrawal.
. Insurance organizations are usually “need-driven” and have an aggressive selling philosophy.73 million). the bank employees have to undergo certain minimum period of training. There are many differences in the way of thinking and business approaches of bankers and the managers of insurance companies.
where the customers are willing to get many services like lockers and safe deposit systems and other products and services from banks. which would be an avenue with easy access. With a good IT infrastructure.
Banks' database is enormous even though the goodwill may not be
the same. In most cases banks provide salary disbursement and loan facilities but here they can provide insurance cover as well.
Success of a Bancassurance venture requires change in approach. burglary insurance and medi-claim insurance etc. They can take advantage of this by cross-selling the insurance products and combine it as a package.
Banks in their normal course of functions lend finance in the form
of loans for cars. This database has to be dissected and various homogeneous groups are to be churned out in order to position the Bancassurance products. this can really do wonders. there is a good opportunity to market many property related general insurance policies like fire insurance.
Another area that could be of interest to bankers to sell insurance is exploiting the corporate customers and tying up for insurance of the employees of corporate clients. In urban and metro areas.CE
There are many people in many areas that are still unaware about the insurance and its various products and are waiting that somebody should come and give them the information about it. or for buying a house to clients etc.
thinking and work culture on the part of everybody involved. The work force at every level are so well entrenched in their classical way of working that there is a definite threat of resistance to any change that Bancassurance may set in. Any relocation to a new
no involvement by the branch manager.S. If many joint ventures took place between banks and insurance companies then it may happen that the customers may not respond to such ventures as happened in U. lack of a sales culture within the bank. Insurance in India is perceived more as a saving option than providing risk cover.
. So this may create an adverse feeling in the minds of the bankers that such products may lessen the sales of regular bank saving products. Also selling of investment and good return products may affect the FD Portfolio of the banks. inadequate incentives.
If no strict norms are there for such ventures then many unholy
ventures may take place which may give rise to tough competition between bancassurers resulting in lower prices and the Bancassurance venture may never break because of such situations. There would be a problem of “Reputational Contagion” i. negative attitudes toward insurance and unwieldy marketing strategy.e. failure to integrate marketing plans.
Another possible threat may come from non-response from the targeted customers.
The most common obstacles to success of Bancassurance are poor
manpower management. similar management and consolidated financial reporting etc.CE
company or subsidiary or change from one work to a different kind of work will not be easily acceptable by the employees. resistance to change. insufficient product promotions. marginal database expertise. poor sales channel linkages. loss of market confidence towards one in a venture leading to loss of confidence on the other because of identical brand recognition.
Global scenario Future scope of Bancassurance Other tie ups Survey Analysis Findings Recommendations Conclusion Bibliography
One of these is bancassurance. income from bancassurance is the only non interest based income. Increased competition also makes it difficult for banks to retain their customers. Bancassurance provides various advantages to banks. the boundaries that have kept various financial services separate from each other have vanished. It started picking up after Insurance Regulatory and Development Authority (IRDA) passed a notification in October 2002 on 'Corporate Agency' regulations.
India's rural market has huge potential that is still untapped by the insurance companies. Banassurance comes as a help in this direction also. that no company would be interested in doing so. This is one method of penetrating the market. Interest is market driven and fluctuating and quite narrowing these days. Bancassurance is a new buzzword in India. For the banks.
. Due to all these movements.000 branches sell the insurance products one can see the reach. The insurance company gets improved geographical reach without additional costs. As for the insurance company the advantage that bancassurance provides is evident.CE
The business of banking around the globe is changing due to integration of global financial markets. In India around 67. banks can act as an agent of one life and one non-life insurer.000 branches are there for PSU banks alone. universalization of banking operations and diversification in non-banking activities. As per the concept of Corporate Agency. If all 67. Banks do not get great margins because of the competition This is why more and more banks are getting into bancassurance so as to improve their incomes. Setting up their own networks entails such a huge cost. development of new technologies. Providing multiple services at one place to the customers means enhanced customer satisfaction. Currently bancassurance accounts for a share of almost 25-30% of the premium income amongst the private players in India. insurers and the customers. It originated in India in the year 2000 when the Government issued notification under Banking Regulation Act which allowed Indian Banks to do insurance distribution. The coming together of different financial services has provided synergies in operations and development of new concepts.
Thus. As for the customer the competitive nature of the Indian market ensures that the reduction in costs would result in benefits in terms of lower premium rates being passed on to him. The success of the partnership between the two entities depends on the ‘right model’ partnership. Given these changes. The penetration level of life insurance in the Indian market is considerably low at 2. there is every reason to be optimistic that bancassurance in India will play a long inning. It helps the insurance companies to tap the market at a much lower cost. bancassurance and collaboration between banks and insurers has a long way to go in India. bancassurance provide an apparently viable model for product diversification by banks and a cost-effective distribution channel for insurers.3% of GDP with only 8% of the total population currently insured.CE
Bancassurance again comes as an answer. With almost half of the population likely to be in the 'wage earner' bracket by 2010.
Bancassurance is yet to be exploited in Singapore. During the last two decades. has been basically European. among others – by selling insurance products across the counter. In the US. and even among them most are underinsured. Italy and Belgium. In China. banks are limited to playing the role of tide agents to insurance companies. Sales agents also play an important role on a market entirely regulated by the Financial Services & Markets Act (FSMA) which imposes very strict marketing conditions. Although it enjoys a penetration rate in excess of 50% in France. The Life insurance market in the UK is largely in the hands of the brokers. In the Philippines. Bancassurance recorded huge growth in Europe but not in USA and Canada. even if their market share has declined from 85% in 1992 to 54% in 1999. which can still provide a good platform for bancassurance to develop. so far. Japan has to make a remarkable headway in bancassurance. In Hong Kong. their market share has increased from 40% in 1992 to 54% in 1999.
. There is a huge market potential out there in many countries and especially in India when compared to the global benchmark. It is a good news to bancassurers that only about 25% of the global insurable population is insured. Bancassurance has seen tremendous acceptance and growth across nations. the market continues to be dominated by general sales agents. Spain. banks have benefited from recent reforms – financial deregulation. banks are permitted to own 100% of the insurance company. With advent of bancassurance. Bnacassurance. other countries have opted for more traditional networks. In Germany. the life insurance sales went up by 240%. there were hurdles till recently banks were not allowed to do insurance business and vice versa. especially in Europe.CE
Bancassurance has grown at different pace and taken different shapes and forms in different countries depending on the demography. bancassurance has taken deep roots in various countries. economic and legislations in that country. when a Swiss bank introduced bancassurance. In several countries in LatinAmerica.
bancassurance has simply outshined other alternate channels of distribution with a share of almost 25-30% of the premium income amongst the private players. 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. In emerging markets. In India the bancassurance model is still in its nascent stages. In this phase.CE
Future scope for Bancassurance
By now. While development in individual markets will continue to depend heavily on each country’s regulatory and business environment. In India. To be fruitful. bancassurance will likely see further significant development in the coming years. The deregulation of the insurance sector in India has resulted in a phase where innovative distribution channels are being explored. but the tremendous growth and acceptability in the last three years reflects green pasture in future. it is vital for bancassurance to ensure that banks remain fully committed to promoting and distributing insurance products. There is no doubt that banks are set to become a significant distributor of insurance related products and services in the years to come. the signs of initial success are already there despite the fact that it is a completely new phenomenon. bancassurers could profit from the tendency of governments to privatize health care and pension liabilities. 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. new entrants have successfully employed bancassurance to compete with incumbent companies. Given the current relatively low bancassurance penetration in emerging markets. 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.
Life Insurance Corporation of India
Non-Life Insurance tie-ups: Private Sector Companies:
1. Bajaj Allianz General Insurance Co. 11. Ltd. Royal Sundaram Allianz Insurance Co. 4. 3. Ltd. Ltd. Ltd. TATA-AIG Life Insurance Company Ltd. 5. SBI Life Insurance Company Limited 7. Ltd. 10. Pvt. 3. ICICI Lombard General Insurance Co. Max New York Life Insurance Co.CE
Life Insurance tie-ups:
Private Sector Companies:
1. 6. 4. HDFC Standard Life Insurance Co. Ltd. Pvt. Aviva Life Insurance Co India Pvt. MetLife India Insurance Co. Ltd. 13. ING Vysya Life Insurance Co.
. TATA-AIG General Insurance Co. Ltd. 5. Birla Sun Life Insurance Co. Ltd. 14. Ltd. Kotak Mahindra OU Mutual Life Insurance Co. 6. Ltd. Ltd. Ltd. Reliance General Insurance Co. ICICI Prudential Life Insurance Co. Ltd. 15. Reliance Life Insurance Co. Bajaj Allianz Life Insurance Co. Ltd. 9. Ltd.
Public Sector Company:
16. 2. IFFCO-TOKIO General Insurance Co. Bharti Axa Life Insurance Co. Sahara India Life Insurance Co. 12. Ltd. 8. Shriram Life Insurance Co. Ltd. Ltd. 2.
. 14. Cholamandalam MS General Insurance Co. The New India Assurance Co. 9. 12. Ltd. Ltd. United India Insurance Co. Export Credit Guarantee Corporation Ltd. Ltd. Ltd. 15.CE
7. 8. Ltd.
Public Sector Companies:
10. Agriculture Insurance Company Ltd. Ltd. Ltd. National Insurance Co. Star Health and Alhed Insurance Co. 13. 11. The Oriental Insurance Co. HDFC Chubb General Insurance Co.
20% of the respondents were amused with the term bancassurance and didn’t know anything about it and the services provided by their banks. businessmen. These included several housewives.CE
Survey analysis (questionnaire)
A survey was conducted of about 50 people who did regular banking transactions and also had an insurance policy.They knew with which Insurance Company their bank has tie up with.
. students. However. The following analysis was done on the basis of the survey conducted:
Are you aware of Bancassurance?
Interpretation: . 80% of respondents were aware that their bank provided bancaasurance.Among those who surveyed. professionals. etc. also they were aware about various policies provided by their banks.
The Kind Of Insurance Policy Taken From The Bank:-
70 60 50 40 30 23% 20 10 0
Have You Taken An Insurance Policy From Your Bank?
Interpretation: Among the people who were surveyed. Remaining 66% respondents didn’t opt to take a policy from their banks. there were only 34% people who had taken insurance policy from their respective banks.
they took the policy.
Reasons For Taking An Insurance Policy:-
90 80 70 60 50 40 30 20 10 0
Brand Image of Bank
Bank Image of Insurance
Interpretation: There was a mixed response from the customers. 65% said that since. Out of the people surveyed 63% said that they have taken a loan based insurance. Only 18% have taken life insurance cover from the bank and 42% belong to others category.
. 80% said that they took the insurance policy because of security benefits.CE
Deposit Based Loan Based
Life Insurance Others
Interpretation: Maximum number of insurance taken was related to loan. they trusted their bank. There were 4o% who said that the brand image of the company also mattered. Only 28% said that savings was a reason that encouraged them to buy insurance policy. It was either car insurance or a home insurance. There were 23% who have taken insurance which are deposit based because it is a part of the deposit scheme.
Which Bank Do You Feel Would Excel In Bancaasurance? Rate Them Accordingly
. 20% took insurance from companies because of their trust on the company.CE
On Your Choice Which Mode Of Insurance Distribution Channel Would You Prefer To Buy The Policy From?
Insurance companies 20%
Brokers 7% Agents 50%
Interpretation: 50% people preferred agents because they provide personalized services. 23% said they would buy insurance from banks because of the brand name and their trust on banks. Only 7% said that they would buy insurance from brokers.
Because foreign banks have proper management and aggressive selling strategies. 70% votes were given to foreign banks.CE
100 90 80 70 60 50 40 30 20 10 0
Public Sector Banks
Private Sector Banks
Interpretation: 90% people said that private sector banks would excel in this because of their aggressive selling policies and they provide quality services to the customers. Do You Think Bancassurance Has A Good Future?
. The public sector banks were given the least votes because of their lazy approach to work.
Yes. Internet banking etc the banks will soon go virtual so there is not much scope for it. Almost many people have a fair idea about Bancassurance and that their banks sell various insurance products.CE
No. But 7% believe that because of the emergence of the new technology such as ATM’s.95%
Interpretation: 95% people said that they believe that Bancassurance has a very bright future because there is an immense potential for the insurance industry in India. but in practice it has been found to be far from straightforward.
Although the concept is simple enough in theory. But still few people don’t know about Bancassurance as a concept.
It is also seen that customers have a lot of trust on the banks.g. As the brand name of the banks is important so is the brand image of the insurance companies.CE
It has been also found out that the banks have various opportunities to cross sell insurance products. and because of that trust the customers will take the insurance products from banks. 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. They should provide after sales services to the customers. The banks fail to provide personalized services as are provided by the agents. So banks will have to improve in that area. It has also clear from the study that the private sector and the foreign banks have better future in Bancassurance. So the banks and the insurance companies must tie-up with the right partners. So by providing insurance. This will help them to create a better image in the minds of the customers. SBI Life Insurance Co. Banks now-a-days are trying to provide each and every service to its customers. banks can add one more service to their list. The insurance companies also have the opportunity to take advantage of the bank’s network and other avenues.
The Insurance companies need to design products specifically for distributing through banks. But the public sector banks are also trying to give them a tough competition e. Trying to sell traditional products may not work so effectively.
rather than adjusted to insurer’s specifications.
A formal and standard agreement between these banks and the
insurance companies should be taken up and drafted by a national regulatory body. the bank management and the management of the insurance company should be able to resolve conflicts arising in future. Banks should also provide after sales services and they should be more aggressive in selling the insurance products.CE
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. Else. For bancassurance to succeed. 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. products and processes will need to be tailored to bank markets. Banks and Insurance companies should apply all the skills and potential in this area and take advantage of the same and they should improve the products from time to time according to the needs of the customers. These agreements must have necessary clauses of revenue sharing. In case of possible conflicts. Banks should also do the settlement of claims which will increase the trust and reliability of the customers on the banks.
. it needs to rebuild the blemished image. the bancassurance would be difficult to succeed in these banks.
. but the tremendous growth and the potential reflects a very bright future for bancassurance in India. But after a detailed research in this topic I have found how important bancassurance can be for bankers. makes insurance selling in India a very difficult task. I am contented that all my objectives have been met to its fullest. after all The SKY IS THE LIMIT!
. I have also experienced that though Bancassurance is not being utilized to its fullest but it surely has a bright future ahead. I have experienced a lot during the preparation of the project. The size of country. Bancassurance will definitely play a defining role as an alternative distribution channel and will change the way insurance is sold in India. I had just a simple idea about Bancassurance. no personal contact with customers. The bridge has been reached and many are beginning to walk those cautious steps across it. The concept of Bancassurance in India is still in its nascent stage. a diverse set of people combined with problems of connectivity in rural areas. 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. India is at the threshold of a significant change in the way insurance is perceived in the country. insurers as well as the customers. lack of call centers. Bancassurance in India has just taken a flying start. But the proper implementation of bancassurance is still facing so many hurdles because of poor manpower management.CE
The life Insurance Industry in India has been progressing at a rapid growth since opening up of the sector. Life Insurance Companies require good distribution strength and tremendous man power to reach out such a huge customer base. inadequate incentives to agents and unfullfilment of other essential requirements. It has a long way to go ……….
insuremagic.india infoline. Business today.
Insurance watch. Theories and Practices in Insurance.sbilife.com
. Business world.google.com