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BANCASSURANCE IN INDIA
Submitted by: Shobhit Saxena Roll No. 14108

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Table of Contents
Introduction…………………………………………………………………………………………….….3 What Is Bancassurance?............................................................................................................... ..............4 Meaning……………………………………………………………………………………………………4 Origin………………………………………………………………………………………………………5 Bancassurance Framework………………………………………………………………………………5 Scope For Bancassurance In India ……………………………………………………………………...6 Why Should Banks Enter Insurance?.......................................................................................................7 Advantages To Insurers………………………………………………………………………………......8 Advantages To Consumers……………………………………………………………………………….9 Models Of Bancassurance………………………………………………………………………………...9 Existing Tie-Ups Between Insurance Companies And Banks ………………………………………..12 Existing Relationship Between Insurance Companies And Banks …………………………………..12 RBI Norms For Banks…………………………………………………………………………………..13 IRDA Norms For Insurance Companies………………………………….……………………………15 Reasons For Growing Phenomena Of Bancassurance……………………………………..………….16 Growth In Some Of The Key Elements……………………………………………………………..….17 Critical Success Factor…………………………………………………………………………………..17 Distribution Channels……………………………………………………………………………………18 Trends…………………………………………………………………………………………………… 20 Challenges………………………………………………………………………………………………...21 Swot Analysis…………………………………………………………………………………………….22 Recommendations……………………………………………………….………………………………26 Example: Sbi Life Insurance……………………………………………………………………..……..27 Conclusion………………………………………………………………………………………………..28 Bibliography….……………………………………..………………………………………………..…..29

insurance can be available at affordable prices to people even in remote corners of the country. through Bancassurance. With banking network of 65.connotes distribution of insurance products through banking channels. This distribution will undergo a sea change as various insurance companies are proposing to bring insurance products into the lives of the common man by making them available at the most basic financial point. resistance to change.000 branches serving more than 300 million retail banking customers. In this competitive and liberalized environment everyone is trying to do better than others and consequently survival of the fittest has come into effect The life insurance industry in India has been progressing at a rapid pace since opening up of the sector in 2000. poor sales channel linkages. Bancassurance . Even insurers and banks that seem ideally suited for a Bancassurance partnership can run into problems during implementation. If insurance in India is to succeed. Life insurance companies require immense distribution strength and tremendous manpower to reach out to such a huge customer base.3|Page INTRODUCTION The Banking and Insurance industries have changed rapidly in t h e c h a n g i n g a n d c h a l l e n g i n g e c o n o m i c e n v i r o n m e n t t h r o u g h o u t t h e world. it can only be through the Bancassurance channel. no involvement by the branch manager. the Indian banking sector has far to go. but there are challenges. have emerged as viable sources for the distribution of insurance products. the local bank branch. Some of these have recently been cleared with the passage of the Insurance (Amendment) Act. lack of a sales culture within the bank. Banks.a term coined by combining the two words bank and insurance (in French) . marginal database expertise. failure to integrate marketing plans. makes insurance selling in India a very difficult proposition. Bancassurance is the process through which insurance products are sold to customers at their local banks. The relationship is symbiotic. The most common challenges to success are poor manpower management. insufficient product promotions. inadequate incentives. . negative attitudes toward insurance and unwieldy marketing strategy. a diverse set of people combined with problems of connectivity in rural areas. with their geographical spread and penetration in terms of customer reach of all segments. But one thing stands obvious. Looking at the west where sales through the banking network have been a roaring success. 2002. One more important obstacle in development of Bancassurance in India has been a set of regulatory barriers. The size of the country. This concept gained currency in the growing global insurance industry and its search for new channels of distribution. Simply put.

4|Page WHAT IS BANCASSURANCE? With the opening up of the insurance sector and with so many players entering the Indian insurance industry. „Bancassurance‟ refers to banks acting as corporate agents for insurers to distribute insurance products. companies are forced to come up with innovative techniques to market their products and services. such as legal. create more consumer awareness about their products and offer them at a competitive price. insurance and fund management are all interrelated activities and have inherent synergies. Bancassurance if taken in right spirit and implemented properly can be win-win situation for the all the participants' viz. 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. Bancassurance. Other features. selling of insurance by banks would be mutually beneficial for banks and insurance companies. it is required by the insurance companies to come up with innovative products. was thought of as a potential distribution channel. cultural and/or behavioural aspects also form an integral part of the concept of Bancassurance (SCOR 2003). useful for the insurance companies. „Bancassurance‟ is defined to mean banks dealing in insurance products of both life and non-life type in any forms. At this juncture. insurers and the customer. According to IRDA.. fiscal. With the increased competition and squeezing of interest rates spread. MEANING Bancassurance is the distribution of insurance products through the bank's distribution channel. With these developments and increased pressures in combating competition. Since the banking services.” Literature on Bancassurance does not differentiate if the Bancassurance refers to selling of life insurance products or non-life insurance products. Fee based income can be increased through hawking of risk products like insurance. Bancassurance can be important source of revenue. Accordingly. profits are likely to be under pressure. . It is also important to clarify that the term Bancassurance does not just refer specifically to distribution alone. banking sector with it's far and wide reach. banks. To put it simply. This union of the two sectors is what is known as Bancassurance.

With the liberalization and deregulation of the insurance industry. Mexico.5|Page ORIGIN The banks taking over insurance is particularly well-documented with reference to the experience in Europe. In India. BANCASSURANCE FRAMEWORK . followed by Germany. UK. It is also developing in Canada. the concept of Bancassurance is very new. France taking the lead. Bancassurance evolved in India around 2002. Germany took the lead and it was called “ALLFINANZ”. In USA the practice was late to start (in 90s). banks started the process of selling life insurance decades ago and customers found the concept appealing for various reasons. and Australia. Across Europe in countries like Spain and UK. The system of Bancassurance was well received in Europe. Spain etc.

semi urban & rural areas of nation. in recent years. There are 70324 bank offices in India and around 16000 people are served by each bank office. derivatives.000 branches and reach in urban. The prospects of Bancassurance in India are really bright because of following reasons:       Increasing PPP (purchasing power parity).28 public sector banks (that is with the government of India holding a stake). viz. It‟s a huge banking infrastructure and among the best banking network in the world. it is surmised that even the „global economic growth‟ hinges on growth prospects of the emerging economies like China and India to a greater extent. semi urban & rural India. BASEL NORM-II (2009). Altogether they have a combined network of over 53. banks. Bancassurance if taken in right spirit and implemented properly can be a win-win situation for the all the participants.6|Page SCOPE FOR BANCASSURANCE IN INDIA It has become clear that as economy grows it not only demands stronger and vibrant financial sector but also necessitates provision of more sophisticated and variety of financial and banking products and services. In fact. In simple words. Expansion of middle income class Indians. there is greater scope for use of Bancassurance.. . India has 88 scheduled commercial banks (SCBs) .. as at end March 2009. Experience reveals that at the initial growing stage of the economy the primary financial needs are met by the banking system and thereafter as the economy moves on to higher levels. as India has already more than 200 million middle class population coupled with vast banking network with largest depositors base. financial sector has also become more vibrant with the financial reforms. are strongly felt. As India is being considered one of the fast developing economies among the emerging market economies. they may be publicly listed and traded on stock exchanges ) and 31 foreign banks. For instance. etc. insurers and the customers. Huge inflow of FDI. 29 private banks (these do not have government stake. Experience also showed that economic growth had strongly supported the expansion of middle income class in most of the Asian countries. Moreover. Though slowed down. and now it is the turn of India. Indian economy is still growing faster than most Huge banking infrastructure across urban. the need for the other non-banking financial products including insurance. there were more than 543 lakh bank accounts with scheduled commercial banks. it is aptly put that Bancassurance has promised to combine insurance companies‟ competitive edge in the “production” of insurance products with banks‟ edge in their distribution. through their vast retail networks.

banks could change the face of insurance distribution. loyal customer base. Banks that effectively cross-sell financial products can leverage their distribution and processing capabilities for profitable operating expense ratios. leveraging their reputation and 'distribution systems‟ (branch. They also have access to multiple communications channels. Banks also enjoy significant brand awareness within their geographic regions. such as statement inserts. Sale of personal line insurance products through banks meets an important set of consumer needs.  Other bank strengths are their marketing and processing capabilities. Most large retail banks engender a great deal of trust in broad segments of consumers.  Another advantage banks have over traditional insurance distributors is the lower cost per sales lead made possible by their sizable. radio and/or television. etc. One of the best ways to increase ROA. again providing for a lower per-lead cost when advertising through print.  By leveraging their strengths and finding ways to overcome their weaknesses. a bank‟s branch network allows the face to face contact that is so important in the sale of personal insurance. Banks' proficiency in using technology has resulted in improvements in transaction processing and customer service  By successfully mining their customer databases. which they can leverage in selling them personal line insurance products. European banks have more than doubled the conversion rates of insurance leads into sales and have increased sales productivity to a ratio which is more than enough to make Bancassurance a highly profitable proposition. assuming a constant asset base. phone. is through fee income. Banks that make the most of these advantages are able to penetrate their customer base and markets for above-average market share. In addition.7|Page WHY SHOULD BANKS ENTER INSURANCE? There are several reasons why banks should seriously consider Bancassurance:  The most important of which is increased return on assets (ROA). Banks have extensive experience in marketing to both existing customers (for retention and cross selling) and non-customers (for acquisition and awareness). and one way to build fee income is through the sale of insurance products. . ATMs. and mail) to make appointments. and utilizing 'sales techniques‟ and products tailored to the middle market. telemarketing. direct mail. Banks that build fee income can cover more of their operating expenses.

8|Page ADVANTAGES TO INSURERS  The Insurance Company can increase their business through the banking distribution channels because the banks have so many customers. investment and purchase capability can be used to customize products and sell accordingly.  Customer database like customers' financial standing.  The selling can be structured properly by selling insurance products through banks. Further service aspect can also be tackled easily.  The insurance companies can also get access to ATM‟s and other technology being used by the banks. spending habits.  Insurers can exploit the banks' wide network of branches for distribution of products.  The product can be customized as per the needs of the customers A Win-Win Situation . conversion ratio of leads to sales is likely to be high.  By cutting cost Insurers can serve better to customers in terms lower premium rate and better risk coverage through product diversification. The penetration of banks' branches into the rural areas can be utilized to sell products in those areas.  Since banks have already established relationship with customers.

is prone to reputational risk of the marketing bank. There are also practical difficulties in the form of . 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. i. wherein the bank. while controlling access to the clients data base. banks to begin with can resort to this model and then move on to the other models. Referral model is nothing but a simple arrangement.9|Page ADVANTAGES TO CONSUMERS  Product innovation and distribution activities are directed towards the satisfaction of needs of the customer. MODELS OF BANCASSURANCE I. personal loans etc.e.  Any new insurance product routed through the Bancassurance Channel would be well received by customers. 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.  Easy accesses for claims. For.  Comprehensive financial advisory services under one roof. In fact a number of banks in India have already resorted to this strategy to begin with. 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.  Customers could also get a share in the cost savings in the form of reduced premium rate because of economies of scope.. 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. diversified product quality in time and at their doorstep service by banks. besides getting better financial counseling at single point.  Innovative and better product ranges and products designed as per the needs of customers. There is greater scope in the medium term for this model. as banks are a regular visiting place for customers. however. 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. b) Corporate Agency The other form of non-sick participatory distribution channel is that of „Corporate Agency‟. mutual funds. This. insurance services along with other financial services such as banking.  Bancassurance model assists customers in terms of reduction price.

the products of banks and insurance will have their respective brands too. however. This includes banks having wholly owned insurance subsidiaries with or without foreign participation. This could. this type of bancassurance seems to have emerged out of necessity in India to an extent. 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. be overcome by intensive training to chosen staff. because consumers generally prefer to purchase policies through broker banks that offer a wide range of products from competing insurers. II. 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. 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.10 | P a g e professional knowledge about the insurance products. This model of bancassurance worked well in the US. therefore. c) Insurance as Fully Integrated Financial Service/ Joint ventures Apart from the above two. 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. . This may be suitable to relatively larger banks with sound financials and has better infrastructure. Insurance is sold as one more item in the menu of products offered to the bank‟s customer. however. 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. 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. packaged with proper incentives in the banks coupled with selling of simple insurance products in the initial stage.

in recent years. housing loans. Many banks in India.11 | P a g e (b) 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. 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. education loans.. . The companies issue the policies and pay the commission to them. etc. III. In this method also there is a win-win situation every where as the banks get commission. banks could sell the insurance products without any additional efforts.g. In most times. has been aggressively marketing credit and debit card business. they only give the database to the insurance companies. have also been packaged with the insurance cover as an additional incentive. whereas the cardholders get the „insurance cover‟ for a nominal fee or (implicitly included in the annual fee) free from explicit charges/ premium. Thus. Here the banks do not issue the policies. credit card. e. That is called referral basis. etc. the insurance companies get databases of the customers and the customers get the benefits. Similarly the home loans / vehicle loans. Bank Referrals There is also another method called 'Bank Referral'..

12 | P a g e Existing Tie-Ups Between Insurance Companies And Banks Existing Relationship Between Insurance Companies And Banks .

if any. would be eligible. The bank should have net profit for the last three consecutive years. 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. 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. . RBI issued the guidelines on Insurance business for banks. iv. more than one public sector bank or private sector bank may be allowed to participate in the equity of the insurance joint venture. v. subject to safeguards.13 | P a g e 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. 1 Any scheduled commercial bank would be permitted to undertake insurance business as agent of insurance companies on fee basis. 4. Without any risk participation 2. 3. iii.500 crore. In cases where a foreign partner contributes 26% of the equity with the approval of Insurance Regulatory and Development Authority/Foreign Investment Promotion Board. specifying „Insurance‟ as a permissible form of business that could be undertaken by banks under Section 6(1) (o) of The Banking Regulation Act. of the concerned bank should be satisfactory. 2000. The track record of the performance of the subsidiaries. The eligibility criteria for joint venture participant are as under: i. The level of non-performing assets should be reasonable. 1949. As such participants will also assume insurance risk. ii. The CRAR of the bank should not be less than 10 per cent. The net worth of the bank should not be less than Rs. A subsidiary of a bank or of another bank will not normally be allowed to join the insurance company on risk participation basis. 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 not pose any future threat to the bank in its present or the proposed line of activity. All banks entering into insurance business will be required to obtain prior approval of the Reserve Bank. The level of NPAs should be reasonable. . 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. There should be „arms length‟ relationship between the bank and the insurance outfit.50 crore. 1999. This will include compliance with Section 6AA of the Insurance Act as amended by the IRDA Act. can make investments up to 10% of the net worth of the bank or Rs. Banks which are not eligible for „joint venture‟ participant as above. whichever is lower. It should be ensured that risks involved in insurance business do not get transferred to the bank. The bank should have net profit for the last three consecutive years. Latest audited balance sheet will be considered for reckoning the eligibility criteria. 7. 6. in the insurance company for providing infrastructure and services support. The eligibility criteria for these banks will be as under: i. viz. ii. insurance business. 8. The CRAR of the bank should not be less than 10%. Such participation shall be treated as an investment and should be without any contingent liability for the bank.. for divestment of equity in excess of 26 per cent of the paid up capital within a prescribed period of time.14 | P a g e 5. iii.

 Banks cannot become insurance brokers.  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. this barrier has effectively been removed. . Prior it was clearly an impractical necessity and had held up the implementation of Bancassurance in the country. including co-operative banks and RRBs may become corporate agents for one insurance company. As the current legislation places the following: Training and examination requirements: upon the corporate insurance executive within the corporate agency.15 | P a g e IRDA NORMS FOR INSURANCE COMPANIES The Insurance regulatory development & Authority has given certain guidelines for the Bancassurance they are as follows  Chief Insurance Executive: Each bank that sells insurance must have a chief Insurance Executive to handle all the insurance matters & activities. Which have only recently been cleared with the passage of the insurance (amendment) Act 2002. Another regulatory change is published in recent publication of IRDA regulation relating to the Licensing of Corporate agents  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.  Corporate agents: Commercial banks. Issues for regulation: Certain regulatory barriers have slowed the development of Bancassurance in India down.

. insurance and brokerage products and services. Insurers found that direct relationships with customers gave them greater control of their business at a lower cost. Such innovations would include cross selling of banking. the increased use of the Internet by consumers and a blending of insurance and banking corporate cultures. Insurers who operate through the agency relationships hardly have any control on their relationship with their clients.  Insurers have been turning in ever greater numbers to alternative modes of distribution because of the high costs they have paid for agent services.16 | P a g e REASONS FOR GROWING PHENOMENA OF BANCASSURANCE  Life insurance premium represents 55% of the world insurance premium and life insurance is basically a saving market. These costs became too much of a burden for many insurers compared to the returns they generated.  In Non life insurance business banks are looking to provide additional flow of revenues from the same customers through the same channel of distribution and with the same people. is noticed very well that expenses ratio in insurance activities through bancassurance is extensively low as the bank and the insurance company is benefiting from the same distribution channels and people. So it is one of the methods to increase deposits of banks.  Insurers operating through bancassurance hone and control relationships with customers.  The ratio of expenses to premiums.  The prospects for increased consolidation between banking and insurance is more likely dominated and derived by the marketing innovations that are likely to follow from financial service modernization. as an important efficiency factor.

17 | P a g e CRITICAL SUCCESS FACTOR .

Usually Special advisors are paid on a salary basis and they receive incentive compensation based on their sales. i. 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. evolution of technology and deregulation. however avoid this channel. A restriction on the effectiveness of bank employees in generating insurance business is that they have a limited target market. These agents share the mission and objectives of the bancassurers. c. The platform banker may be a teller or a personal loan assistant. Special Advisers Special Advisers are highly trained employees usually belonging to the insurance partner. they are: a. Consequently an insurance company can exercise control only over the activities of the agent which are specified in the contract. 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. But with new developments in consumers‟ behaviours. who distribute insurance products to the bank's corporate clients. 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. believing that agents might oversell out of their interest in quantity and not quality. The reliance of insurance industry was totally on the agents. those customers who actually visit the branch during the opening hours. These are similar to career agents. but rather due to the use of improperly designed remuneration and incentive packages. Salaried Agents Salaried Agents are an advantage for the bancassurers because they are under the control and supervision of bancassurers. Career Agents Career Agents are full-time commissioned sales personnel holding an agency contract. . new distribution channels have been developed successfully and rapidly in recent years. Recently Bancassurers have been making use of various distribution channels. Moreover with the monopoly of public sector insurance companies there was very slow growth in the insurance sector because of lack of competition.e. d. b. The Clients mostly include affluent population who require personalised and high quality service. Such problems with career agents usually arise. insurance products were promoted and sold principally through agency systems only.18 | P a g e DISTRIBUTION CHANNELS Traditionally. not due to the nature of this channel. Many bancassurers. They are generally considered to be independent contractors.

The consumer purchases products directly from the bancassurer by responding to the company's advertisement. Such an arrangement can also provide a vehicle for insurance sales. such as seminars. credit and account applications) should be immediately added with links to the insurer. 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. 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. service and leads. Functions requiring user input (check ordering. This channel can be used for simple packaged products which can be easily understood by the consumer without explanation. Brokerage Banks can open or acquire an e-Brokerage arm and sell insurance products from multiple insurers. Direct Response In this channel no salesperson visits the customer to induce a sale and no face-to-face contact between consumer and seller occurs. i. easy distribution and excellent synergy with the internet capabilities. The advantage of this medium is scale of operation. Outside Lead Generating Techniques One last method for developing bancassurance eyes involves "outside" lead generating techniques. Internet Internet banking is already securely established as an effective and profitable basis for conducting banking operations. strong brands. mailing or telephone offers. . The changed legislative climate across the world should help migration of bancassurance in this direction. in most cases. h. success or failure depends on precisely how the process is developed and managed inside each financial institution.19 | P a g e e. g. Great opportunities await bancassurance partners today and. what-if calculations. direct mail and statement inserts. Bancassurers can feel confident that Internet banking will also prove an efficient vehicle for cross selling of insurance savings and protection products. f.

New and emerging channels are becoming increasingly competitive. banks are starting to embrace direct marketing and Internet banking as tools to distribute insurance products. face-to-face contact is preferred.  As number of banks in India have begun to act as „corporate agents‟ to one or the other insurance company. However. which tends to favour bancassurance development. 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.  Nevertheless. which has resulted in tailor-made products for each segment. . but bancassurers have begun to finely segment the market.  Banks by and large are resorting to either „referral models‟ or model‟ to begin with.  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. „Corporate agency  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. it is a common sight that banks canvassing and marketing the insurance products across the counters. due to the tangible cost benefits embedded in product pricing or through the appeal of convenience and innovation.  Some bancassurers are also beginning to focus exclusively on distribution. In some markets.20 | P a g e TRENDS  Though bancassurance has traditionally targeted the mass market.

just like any merger. increased work-load. cultural due diligence should be done and human resource issues should be adequately prioritized.  Bank employees are traditionally low on motivation. before entering into a bancassurance alliance. resulting in the distribution strategy undergoing a complete change.  The banks also have fear that at some point of time the insurance partner may end up cross-selling banking products to their policyholders. a major challenge. So.  Private sector insurance firms are finding „change management‟ in the public sector. maintaining the motivation level are some issues that has cropped up quite occasionally. The sale of non-life products should be weighted against the higher cost of servicing those policies. additional training.  Human Resource Management has experienced some difficulty due to such alliances in financial industry.21 | P a g e CHALLENGES  Increasing sales of non-life products. almost every two years. So because of this there is distinction created between public and private sector banks. State-owned banks get a new chairman. there is a possibility of conflict if both the banks and the agent target the same customers. Lack of sales culture itself is bigger roadblock than the lack of sales skills in the employees. to the extent those risks are retained by the banks. Banks are generally used to only product packaged selling and hence selling insurance products do not seem to fit naturally in their system. . often from another bank. Poaching for employees. If the insurer is selling the products by agents as well as banks. require sophisticated products and risk management.

Even though.  Banks also enjoy a wide network of branches. simultaneously. Banks are selling Personal Accident and Baggage Insurance directly to their Credit Card members as a value addition to their products. The sale of insurance products can earn banks very significant commissions (particularly for regular premium products). Banks have less risk but the insurance has a greater risk. 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.  Banks are very well aware with the psychology of the customers because of their interaction with the customers on regular basis. STRENGTHS:  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. banks and insurance companies in India are yet to exchange their wedding rings.22 | P a g e SWOT ANALYSIS Banking and Insurance are very different businesses. which previously was not thought of. even in the remotest areas that can facilitate taking up the task on a large and massive scale. In addition. . one of the major strategic gains from implementing bancassurance successfully is the development of a sales culture within the bank. They also enjoy pride of place in the hearts of people because of their long presence and sustained image. Bancassurance as a means of distribution of insurance products is already in force in some form or the other.  Banks have the credibility established with their constituents because of a variety of services and schemes provided by them. Bancassurance enables banks and insurance companies to complement each other‟s strengths as well. Banks can straightaway leverage their existing capabilities in terms of database and face-to face contact to market insurance products to generate some income for themselves. 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. This can be used by the bank to promote traditional banking products and other financial services as well.

 With the help of banks trained staff. However that may not be the case in regards to a bank employee. Insurance organizations are usually “need-driven” and have an aggressive selling philosophy. the visits in urban or metro branches are going to be fewer because of ATM‟s and e-banking. WEAKNESSES  In spite of growing emphasis on total branch mechanism and full computerization of bank branches. followed by a test and then get themselves licensed.  Other than all these things there is a huge potential for insurance sector. Banks are traditionally “demand-driven” organizations with a reactive selling philosophy. its brand name and the confidence and reliability of people on the banks.  There are many differences in the way of thinking and business approaches of bankers and the managers of insurance companies. the rural and semi-urban banks have still to see information technology as an enabler. The IT culture is unfortunately missing completely in all of the future collaborations. Busy customers will have no time to have a discussion on a longterm durable purchase like insurance across the counter. Moreover the standards of the examination have been raised in the recent past making it difficult for many examinees to clear the same. .23 | P a g e  People rely more upon LIC and GIC for taking insurance. as the population of India is high and a large part of it has remained untapped till now. Also.  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. If the products of LIC and GIC are provided through bancassurance it would be an added advantage to the insurance companies. The internet connections are also not properly provided to the staff.  To undertake the distribution of the insurance products. the bank employees have to undergo certain minimum period of training. So this can create an added advantage for both banks and insurers. the selling of insurance products can be done in a more proper way.  The visit of a customer to the bank is to have a simple transaction like deposit or withdrawal.

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.  Banks' database is enormous even though the goodwill may not be the same. With a good IT infrastructure.  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. 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 91.73 million). They can take advantage of this by cross-selling the insurance products and combine it as a package. This database has to be dissected and various homogeneous groups are to be churned out in order to position the Bancassurance products.  Banks in their normal course of functions lend finance in the form of loans for cars. this can really do wonders. In most cases banks provide salary disbursement and loan facilities but here they can provide insurance cover as well. OPPORTUNITIES:  There is a vast untapped potential waiting to be mined particularly for life insurance products. .e. which would be an avenue with easy access.  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. it cannot be tailor made to the requirements of the customer. or for buying a house to clients etc. burglary insurance and medi-claim insurance etc.24 | P a g e  Another drawback is the inflexibility of the products i. where the customers are willing to get many services like lockers and safe deposit systems and other products and services from banks.  In urban and metro areas. there is a good opportunity to market many property related general insurance policies like fire insurance.

thinking and work culture on the part of everybody involved.  Insurance in India is perceived more as a saving option than providing risk cover.  Another possible threat may come from non-response from the targeted customers.S. Any relocation to a new company or subsidiary or change from one work to a different kind of work will not be easily acceptable by the employees. no involvement by the branch manager. lack of a sales culture within the bank.  There would be a problem of “Reputational Contagion” i. marginal database expertise. insufficient product promotions. loss of market confidence towards one in a venture leading to loss of confidence on the other because of identical brand recognition. 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. negative attitudes toward insurance and unwieldy marketing strategy. similar management and consolidated financial reporting etc. Also selling of investment and good return products may affect the FD Portfolio of the banks.e.25 | P a g e Threats:  Success of a Bancassurance venture requires change in approach. 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. resistance to change. 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.  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. poor sales channel linkages. . failure to integrate marketing plans.  The most common obstacles to success of Bancassurance are poor manpower management. inadequate incentives.

rather than adjusted to insurer‟s specifications. it needs to rebuild the blemished image.26 | P a g e RECOMMENDATIONS  The Insurance companies need to design products specifically for distributing through banks.  In India.  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.  For bancassurance to succeed. Else. . products and processes will need to be tailored to bank markets.  Banks should also provide after sales services and they should be more aggressive in selling the insurance products.  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. Trying to sell traditional products may not work so effectively.  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.  Banks should also do the settlement of claims which will increase the trust and reliability of the customers on the banks. In case of possible conflicts. the bancassurance would be difficult to succeed in these banks. 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.

The bank is looking for business from every customer segment of the bank rural and urban segments. SBI -Life is banking on the bancassurance model on the strength of the SBI Groups 10000 plus bank branches and its vast customer base. Besides their own channels they are planning to distribute products through other interested banking channels also. Net banking. Technology is an integral part of this operation. SBI‟s stake in the venture is 74% whereas Cardiff has 26% share. EDI. policy product details. In addition it is also tapping other. the largest bank in the country and bancassurance major Cardiff of France. 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. They have consistently. online premium calculator and facility for group insurance customers to view their individual savings status on the Web. The project was initiated in April 2004. upper. 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 Life has implemented an Internet-centric IT system with browserbased front-office and back-office systems. SBI Life Insurance Company is the first among the 14 life insurance companies in the private sector to consistently reporting profits. Their success is largely on the channel strategy and product strategy. There are life insurance players much more aggressive than SBI and they have still not been able to break the record of SBI. The another aspect is their superior investment performance. a joint venture between State Bank of India. etc. and the initial roll-out was completed by August 2004. middle and lower income segments /groups and corporate segment. SBI has also introduced group insurance to some well managed corporate staffs. SBI has the largest banking network in the county.27 | P a g e EXAMPLE: SBI LIFE INSURANCE SBI Life insurance. They have launched many products so far incorporating certain features that are introduced for the first time in the country. SBI Life Insurance is uniquely placed as a pioneer to usher bancassurance into India. The organization has the facility to pay premiums through credit cards. Cardiff provided the technology required. This is fully integrated with the core systems through industry standards such as XML. generated 11-12 per cent earnings from the investments. 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). standing instructions. personal loans and credit cards. over the last two years. channel management. etc. 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 .

The factors and principles of why it is a success elsewhere exist in India. banks need to strive towards that direction. The success of bancassurance greatly hinges on banks ensuring excellent customers relationship. especially now that banks are starting to become more diverse financial institutions.the customer. Banks. savings and insurance products. bancassurance would turn out to be a norm rather than an exception in future in India. banks have recognised the potential of bancassurance in India and will take equity stakes in insurance companies. Going by the present pace. although slow to gain pace. giving wider choice for the customers. pensions. the insurance companies and the banks. Adequate training coupled with sufficient incentive system could avert the banks‟ staff resistance if any.28 | P a g e CONCLUSION The creation of Bancassurance operations has a material impact on the financial services industry at large. is now taking off across Asia. and there is no doubt that banks are set to become a significant distributor of insurance related products and services in the years to come. Where legislation has allowed. In sum. and the concept of universal banking is being accepted. bancassurance strategy would be a „win-win situation‟ for all the parties involved . It leads to the creation of 'one-stop shop' where a customer can apply for mortgages. insurance companies and traditional fund management houses are converging towards a model of global retail financial institution offering a wide array of products. bancassurance has mostly been a phenomenal success and. Regulators could explore the possibility of allowing banks having tie-up arrangements with more than one insurance company. . in the long run. therefore. In addition to acting as distributors. In India. the signs of initial success are already there despite the fact that it is a completely new phenomenon.

php .com/artbuzz.insuranceinstituteofindia.ibexi.html  https://www.com/downloads/Forms/III/Journal2008/ Journal08_%20pg49-54_banc.com/articles/bancassurance-in-india.com/papers/Bancassurance.einsuranceprofessional.29 | P a g e BIBLIOGRPAHY  http://www.pdf  http://tips.thinkrupee.pdf  http://www.

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