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Project On Bancassurance
Project On Bancassurance
Executive Summary
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.
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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.
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Chapter 1
1. Definition
2. History
1. Definition
2. History
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Introduction to Banking
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The Insurance Act, 1938 was the first legislation governing all
forms of insurance to provide strict state control over insurance
business.Today there are 14 general insurance companies and 14 life
insurance companies operating in the country. But today also the
insurance companies are trying to capture Indian markets as not many
people are aware of it.
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provides long- term funds for infrastructure development at the same time
strengthening the risk taking ability of the country.
Chapter 2
About Bancassurance
1. Meaning
2. Origin
3. Models of Bancassurance
i. Structural classification
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What is BANCASSURANCE?
Meaning
Bancassurance is the distribution of insurance products through the
bank's distribution channel. It is a phenomenon wherein insurance
products are offered through the distribution channels of the banking
services along with a complete range of banking and investment products
and services. To put it simply, Bancassurance, tries to exploit synergies
between both the insurance companies and banks.
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Origin
Germany took the lead and it was called “ALLFINANZ”. The system of
bancassurance was well received in Europe. France taking the lead,
followed by Germany, UK, Spain etc. In USA the practice was late to
start (in 90s). It is also developing in Canada, Mexico, and Australia.
Models of Bancassurance
I. Structural Classification
a) Referral Model
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clients data base, 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. In fact a number of banks in India have
already resorted to this strategy to begin with. This model would be
suitable for almost all types of banks including the RRBs /cooperative
banks and even cooperative societies both in rural and urban. There is
greater scope in the medium term for this model. For, banks to begin with
can resort to this model and then move on to the other models.
b) Corporate Agency
Apart from the above two, the fully integrated financial service
involves much more comprehensive and intricate relationship between
insurer and bank, where the bank functions as fully universal in its
operation and selling of insurance products is just one more function
within. This includes banks having wholly owned insurance subsidiaries
with or without foreign participation. The great advantage of this strategy
being that the bank could make use of its full potential to reap the benefit
of synergy and therefore the economies of scope. This may be suitable to
relatively larger banks with sound financials and has better infrastructure.
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Chapter 3
Utilities of Bancassurance
1. For Banks:
i. As a source of fee based income
ii. Product diversification
iii. Building close relations with the customers
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For Banks
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Product Diversification
In terms of products, there are endless opportunities for the
banks. Simple term life insurance, endowment policies, annuities,
education plans, depositors’ insurance and credit shield are the policies
conventionally sold through the Bancassurance channels. Medical
insurance, car insurance, home and contents insurance and travel
insurance are also the products which are being distributed by the banks.
However, quite a lot of innovations have taken place in the insurance
market recently to provide more and more Bancassurance-centric
products to satisfy the increasing appetite of the banks for such products.
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Stiff Competition
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Rural Penetration
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database of the bank’s middle income customers, there was a need felt
for Bancassurance.
Chapter 4
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3. In cases where a foreign partner contributes 26% of the equity with the
approval of Insurance Regulatory and Development Authority/Foreign
Investment Promotion Board, more than one public sector bank or private
sector bank may be allowed to participate in the equity of the insurance
joint venture. As such participants will also assume insurance risk, only
those banks which satisfy the criteria given in paragraph 2 above, would
be eligible.
5. Banks which are not eligible for ‘joint venture’ participant as above,
can make investments up to 10% of the net worth of the bank or Rs.50
crore, whichever is lower, in the insurance company for providing
infrastructure and services support. Such participation shall be treated as
an investment and should be without any contingent liability for the bank.
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Chapter 5
Benefits of Bancassurance
1. To Banks
2. To Insurance companies
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3. To Customers
To Banks
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(B) Banks have face-to-face contract with their customers. They can
directly ask them to take a policy. And the banks need not to go any
where for customers.
(D) Banks are using different value added services life-E. Banking tele
banking, direct mail & so on they can also use all the above-
mentioned facility for Bankassurance purpose with customers & non-
customers.
(F) By providing customers with both the services under one roof,
they can improve overall customer satisfaction resulting in higher
customer retention levels.
(I) Banks can cross sell insurance products E.g.: Term insurance
products with loans.
To Insurers
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(A) The Insurance Company can increase their business through the
banking distribution channels because the banks have so many customers.
(B) By cutting cost Insurers can serve better to customers in terms lower
premium rate and better risk coverage through product diversification.
(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.
To Customers
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(D) Easy access for claims, as banks are a regular visiting place for
customers.
(E) Innovative and better product ranges and products designed as per
the needs of customers.
(G) Customers could also get a share in the cost savings in the form of
reduced premium rate because of economies of scope, besides getting
better financial counseling at single point.
Chapter 6
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Distribution Channels:
1. Career agents
2. Special advisers
3. Salaried agents
4. Bank employees
5. Corporate agency & Brokerage firm
6. Direct response
7. Internet
8. E- Brokerage
9. Outside lead generating techniques
Distribution Channels
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Career Agents:
Special Advisers:
Salaried Agents:
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Direct Response:
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Internet:
E-Brokerage:
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Chapter 7
Products offered
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SBI Life understands the basic needs for pension plan and
give the customers financial strength to maintain the life style even
after the retirement. This is a unit linked pension plan wherein the
policyholder chooses an investment period from 5 to 52 years for a
vesting age between 50 to 70 years. They can choose to pay either
single premium or pay regular premium for the entire policy term.
Their contributions are invested into 4 fund options as per their
choice.
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F. For Brokers:
Group Products
I. Retirement Solutions:
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SBI has the largest banking network in the county. The bank is
looking for business from every customer segment of the bank rural and
urban segments, upper, middle and lower income segments /groups and
corporate segment. Besides their own channels they are planning to
distribute products through other interested banking channels also. It is
expected that 2/3 rd of the premium income in expected to come by way
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of bancassurance and the rest from the traditional agency channel as well
as ties up with corporate agents (Sundaram Finance). SBI has also
introduced group insurance to some well managed corporate staffs.
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loans and credit cards. SBI’s access to over 100 million accounts provides
a vibrant base to build insurance selling across every region and
economic strata in the country.
Chapter 8
Various Trends
Challenges
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Trends
Though bancassurance has traditionally targeted the mass market,
but bancassurers have begun to finely segment the market, which
has resulted in tailor-made products for each segment.
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Challenges
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The banks also have fear that at some point of time the insurance
partner may end up cross-selling banking products to their
policyholders. If the insurer is selling the products by agents as
well as banks, there is a possibility of conflict if both the banks and
the agent target the same customers.
Chapter 9
SWOT Analysis
1. Strengths
2. Weaknesses
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3. Opportunities
4. Threats
SWOT Analysis:
Banking and Insurance are very different businesses. Banks
have less risk but the insurance has a greater risk. Even though, 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.
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generate some income for themselves, which previously was not thought
of.
The sale of insurance products can earn banks very
significant commissions (particularly for regular premium products). In
addition, 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. Bancassurance enables
banks and insurance companies to complement each other’s strengths as
well.
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. 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.
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Banks are very well aware with the psychology of the customers
because of their interaction with the customers on regular basis.
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.
People rely more upon LIC and GIC for taking insurance. If the
products of LIC and GIC are provided through bancassurance it
would be an added advantage to the insurance companies.
With the help of banks trained staff, its brand name and the
confidence and reliability of people on the banks, the selling of
insurance products can be done in a more proper way.
Other than all these things there is a huge potential for insurance
sector, as the population of India is high and a large part of it has
remained untapped till now. So this can create an added advantage
for both banks and insurers.
Weaknesses:
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Opportunities:
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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.
In urban and metro areas, where the customers are willing to get
many services like lockers and safe deposit systems and other
products and services from banks, there is a good opportunity to
market many property related general insurance policies like fire
insurance, burglary insurance and medi-claim insurance etc.
Threats:
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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.
Chapter 10
Indian scenario
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Global scenario
Survey Analysis
Findings
Recommendations
Conclusion
Bibliography
Indian Scenario
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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 penetration level of life insurance in the Indian market is
considerably low at 2.3% of GDP with only 8% of the total population
currently insured.
Global Scenario
Bancassurance has grown at different pace and taken different
shapes and forms in different countries depending on the demography,
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economic and legislations in that country. During the last two decades,
bancassurance has taken deep roots in various countries, especially in
Europe. Bnacassurance, so far, has been basically European.
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India has already more than 200 million middle class population
coupled with vast banking network with largest depositors base, there is
greater scope for use of bancassurance. In emerging markets, new
entrants have successfully employed bancassurance to compete with
incumbent companies. Given the current relatively low bancassurance
penetration in emerging markets, bancassurance will likely see further
significant development in the coming years.
Other tie-ups
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Interpretation: Among the people who were surveyed, there were only
34% people who had taken insurance policy from their respective banks.
Remaining 66% respondents didn’t opt to take a policy from their banks.
70 63%
60
50 42%
40
30 23%
18%
20
10
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a part of the deposit scheme. Only 18% have taken life insurance cover
from the bank and 42% belong to others category.
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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. 70% votes were given to foreign banks.
Because foreign banks have proper management and aggressive selling
strategies. The public sector banks were given the least votes because of
their lazy approach to work.
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Findings
Almost many people have a fair idea about Bancassurance and that
their banks sell various insurance products. But still few people
don’t know about Bancassurance as a concept.
It has been also found out that the banks have various opportunities
to cross sell insurance products. The insurance companies also
have the opportunity to take advantage of the bank’s network and
other avenues.
It is also seen that customers have a lot of trust on the banks, and
because of that trust the customers will take the insurance products
from banks.
It has also clear from the study that the private sector and the
foreign banks have better future in Bancassurance. But the public
sector banks are also trying to give them a tough competition e.g.
SBI Life Insurance Co.
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Recommendations
Banks should also provide after sales services and they should be
more aggressive in selling the insurance products.
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.
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Conclusion
The bridge has been reached and many are beginning to walk those
cautious steps across it. Bancassurance in India has just taken a flying
start. It has a long way to go ……….. after all The SKY IS THE LIMIT!
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Bibliography
Insurance watch.
Business world.
Business today.
Webliography
www.insuremagic.com
www.google.com
www.sbilife.com
www.india infoline.com
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