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The life insurance industry in India has been progressing at a rapid pace since opening up of the sector in 2000. The size of the country, a diverse set of people combined with problems of connectivity in rural areas, makes insurance selling in India a very difficult proposition. Life insurance companies require immense distribution strength and tremendous manpower to reach out to such a huge customer base. 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, the local bank branch, through bancassurance. BANCASSURANCE: TWIN THRUST is the process through which insurance products are sold to customers at their local banks. With a banking network of 65,000 branches serving more than 300 million retail banking customers, insurance can be available at affordable prices to people even in remote corners of the country. Twin here signifies the combination of a Bank and an Insurance company the two being the largest institutions of financial services and revenue earners in the domain of finance. Thrust (force that drives something forward) ...thrust in this case is symbiotic n mutual(ly beneficial) helping in the upward/northward growth of both businesses and the economy as a whole. The relationship is symbiotic; but there are challenges. The most common challenges to success are poor manpower management, lack of a sales culture within the bank, no involvement by the branch manager, insufficient product promotions, failure to integrate marketing plans, marginal database expertise,
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poor sales channel linkages, inadequate incentives, resistance to change, negative attitudes toward insurance and unwieldy marketing strategy. Even insurers and banks that seem ideally suited for a bancassurance partnership can run into problems during implementation. Before targeting the market, it is essential to do a SWOT analysis. One more important obstacle in development of bancassurance in India has been a set of regulatory barriers. Some of these have recently been cleared with the passage of the Insurance (Amendment) Act, 2002. Looking at the west where sales through the banking network have been a roaring success, the Indian banking sector has far to go. But one thing stands obvious. If insurance in India is to succeed, it can only be through the bancassurance channel. Thus the scope of this project is limited to the following parameters :♣ ♣ ♣
Emergence of bancassurance in India Relevance of bancassurance in the Indian Financial Sector, Utilities and Advantages to Banks, Insurance Companies and the Regulatory Norms ( RBI and IRDA), Models of bancassurance and SWOT Analysis.
♣ ♣ ♣
To be able to understand to what extent bancassurance has reserved a place in the lives of the people in the country a survey analysis has been conducted.
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The business of banking around the globe is changing due to integration of the global financial markets, development of new technologies, universalization of banking operations and diversification in non-banking financial activities. Due to all these movements, the boundaries that have kept various financial services separate from each other have vanished. The coming together of different financial services has provided synergies in operations and development of new concepts. One of these is Bancassurance. Bancassurance simply means selling of insurance products by banks. Bancassurance, which is also called Allfinanz -. a one-stop financial service to meet the requirements of banking services and also to provide reliable protection to customers. Bancassurance is identified as an alternative distribution channel, the key issue which is closely linked to the regulatory climate of the country to improve the non-interest income of banks. In this arrangement, insurance companies and banks undergo a tie-up, a system in which a bank has a corporate agency with an insurance company to sell its products. By selling insurance policies the bank earns revenue apart from interest. It is called as fee-based income. This income is purely risk free for the bank since the bank simply plays the role of an intermediary for sourcing business to the insurance company. The distribution of insurance products through banks is beneficial not only to the insurance and banking companies, but also to the customers. The growth of
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bancassurance depends on how well the banks and the insurance companies are able to overcome the operational challenges that are being constantly thrown at them. The need of the hour for the bancassurance venture is to inculcate new ideas, new approach and work culture.
But it is a controversial issue as many experts feels that this gives the banking sector too great a control over financial services market in the respective country. Therefore it has also been restricted in many countries too. But, still the countries have permitted Bancassurance in their market has seen a tremendous boom in that sector. The share of premium collected by them has increased in a constant manner. This success coincided with a favorable taxation for life insurance products as well as with the consumers' growing needs, in terms of middle and long term savings, which is due to an inadequacy of the pension schemes in India.
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The term first appeared in France in 1980, to define ‘the sale of insurance products through banks’ distribution channels (SCOR 2003) The Life Insurance Marketing and Research Association’s (LIMRA’s) insurance dictionary defines bancassurance as “the provision of Life insurance services by banks and building societies”. According to IRDA, ‘bancassurance’ refers to banks acting as corporate agents for insurers to distribute insurance products.” Literature on bancassurance does not differentiate if the bancassurance refers to selling of life insurance products or non-life insurance products. Accordingly, ‘bancassurance’ is defined to mean banks dealing in insurance products of both life and nonlife type in any forms. But in this research the focus is entirely concentrated towards life insurance. It is also important to clarify that the term bancassurance does not just refer specifically to distribution alone. Other features, such as legal, fiscal, cultural and/or behavioral aspects also form an integral part of the concept of bancassurance (SCOR 2003).
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Taiwan and Hong Kong have surged ahead in bancassurance. But it was recently legalized in countries such as the United States. According to Michael WhiteSymetra's Bank Fee Income Report (Bank-FIR) of 2007.GLOBAL CONTEXT `Bancassurance' has a French origin — which refers to a bank selling insurance products through its own insurance subsidiary/allied company or any other insurer. the CNP has developed its product distribution through post offices. when the Glass-Steagall Act was repealed after the passage of the Gramm-LeachBliley Act. almost 100% banks are selling insurance products. The largest independent insurance company in France.93 bn to a record of $4. Bancassurance has blossomed across Europe with penetration of pensions and life premium rates ranging from 20% in Germany to 73% in Spain. around 10% of life insurance premium income is generated regularly through bancassurance channel. In the UK. In the Asian markets. In France.7% in 2006. with India and China taking tentative steps towards it. hardly 20% of the banks were selling insurance in 1998 against almost 70 to 90% in many European countries. Europe leads the world in bancassurance. In Asia. 6|P a g e . banks increased their insurance brokerage fee income from $3. bancassurance has become a favorite choice of bankers and insurers and as a result governments have been offering legislative support. according to DataMonitor.BANCASSURANCE . It is a relatively new concept in Australia and Asia.08 bn at a hike of 3. In the US. The bank taking over insurance is particularly well-documented with reference to the experience in Europe. Singapore. Today.
Bancassurance as a concept first began in India.BANCASSURANCE . their entering into insurance business is only a natural corollary and is fully justified too. stride into several new areas and offer innovative products. present-day banks have become far more diversified than ever before. With the liberalization and deregulation of the insurance industry. Thus. ever since espousing of financial reforms following the recommendations of First Narasimhan Committee. India has a population of 1. Therefore. lease and term finance. as ‘insurance’ is another financial service required and desired by the bank’s customers. in particular. when the insurance industry opened up to private participation in December 1999.054 million out of which only 77.59% of $2.7 million Indians have a life insurance policy as per the survey conducted by Federation of Indian Chamber and Commerce of Industry (FICCI). Both banks and insurance companies are looking at each other to generate new sources of income using 18 crore customer accounts.. bancassurance evolved in India around 2002 and competition is now tougher than ever before where everyone is trying to come out with better innovations to stay that one-step ahead. According to Swiss-Re 7|P a g e . viz.INDIAN SCENARIO In India. the contemporary financial landscape has been reshaped. The Indian insurance market accounts only for 0. hire purchase.627 bn global insurance market. capital market / equity market related activities. Banks. real estate finance and so on. merchant banking.
27 public sector banks account for approximately 92% of the total network. So.266 919 4. over the next five years. 22. life insurance premium is expected to increase from $188 bn in 2003 to $450 bn by 2014 and non-life premium from $123 bn to $250 bn over the same period.394 155 302 220 259 77 47 The Indian middle-class segment is the second largest in the world after China. there is a huge chunk of population yet to be tapped. Swiss Re Per Capita Premium(in $) 3. Table: Per Capita Premium in Select Countries Region/Country USA Europeaa(Average) Switzerland UK GulfaCountriesaa(Average) UAE Bahrain Kuwait Oman Saudi Arabia Source: Sigma Report. The study also revealed that India and China are the fastest growing markets for insurance business.000 cr.500 cr and Rs. 13. In India.000 rural branches and 14. the network involves 33. Almost 300 million people in the country can afford to buy life insurance. Many banks and financial institutions have set up joint ventures with foreign insurance companies like SBI Life (with Cardiff of 8|P a g e .343 3.report. In India. Among other things. It is estimated that through bancassurance banks and insurance can collectively receive a fee-based income of Rs.000 semi-urban branches where insurance penetration is largely untapped. the concept of bancassurance is relatively new.
HDFC Standard Life (with HDFC). The increasing number of tie-ups between banks and insurance companies is confirming the growing importance of this distribution channel. the bancassurance channel contributed 70% towards the total sales of Aviva India. significant advances in information technology and consumer demands. To operate as a distribution channel. have taken bancassurance as an important channel for distribution. The companies like Aviva. MetLife. 500 cr and a capital adequacy ratio of a minimum 10%. Banks have got a wide retail network proving to be a vital distribution channel of insurance products. As a result. There is huge market potential in India when compared to the global benchmark. The winds of liberalization has brought the necessary competition and better pricing into the industry with the help of financial engineering techniques and models.France). the IRDA has laid down certain prerequisites. etc. Birla Sun Life. In the financial year 2003-04. SBI Life. The company aimed at acquiring 75% of the total business through bancassurance and the balance through the other channels by 2007. Allianz Group is a business entity engaged in worldwide insurance business embracing more than 70 countries of five continents to serve 60 million customers through its international subsidiary network. MetLife India (MetLife and J&K Bank amongst others) ICICI Prudential (with ICICI). banks must possess a net worth of at least Rs. To ensure that only financially sound banks enter into this stream. etc. banks began exploiting convergence of the financial industry and financial liberalization. It also contributed 6% of non-life premiums and 13% in life in 2006.. Banking institutions and 9|P a g e . SBI Life Insurance Company is a predominant player in bancassurance.
4. 6. 3. The public has immense faith in banks.insurance companies have found bancassurance as an attractive and profitable complement to their existing activities in India. 2. Banks have enormous retail customer base.500 semi-urban branches.Rural and semi urban bank accounts constitiute close to 60% in terms of number of accounts. Integration of the financial service industry in terms of banking. Banks enjoy considerable goodwill and access in the rural regions. 5. The Universal Banking concept is evolving on these lines in India. Banks are the key pillars of India’s financial system.There are more than 33000 branches in rural India (about 50% of total).000 people.indicating the 10|P a g e . Indian Banks have immense outreach to the households. where insurance growth has been most buoyant. Total of 66000 branches (as of 2007) of commercial banks. RELEVANCE OF BANCASSURANCE IN THE INDIAN FINANCIAL SECTOR a 1.Share of ‘individuals’ as a category in bank accounts is steadily increasing. Share of bank deposits in the total financial assets of households has been steadily rising. and approximately 14. each branch serving an average of 15. securities business and insurance is a growing worldwide phenomenon. 200 exclusive Regional Rural Banks in deep hinterland.
Selling insurance to existing mass market banking customers is far less expensive than selling to a group of unknown customers. Money transfer costs in 11|P a g e . This benefit could go to the insured public by way of lower premiums. 11. 10. Competition in the Personal Financial Services area is getting `hot’ in India and that Banks can retain customer loyalty by offering them a vastly expanded and more sophisticated range of products. 7.number of potential lives that could be covered by insurance with the upfront involvement of banks. 8. Banks’ entry in distribution can help to enlarge the insurance customer base rapidly. Low cost of collecting pension contributions is the key element in the success of developing the pension sector. Banks have an important role to play in the pension sector when deregulated. 9. helps to meet client expectations. Banks can put their energies into the small-commission customers that insurance agents would tend to avoid. Acquisition cost of insurance customer through bank is low. Bancassurance helps to lower the distribution costs of insurers. This is vitally important to bring higher motivation levels in banks in India. Fee-based selling helps to enhance the levels of staff productivity in banks. Experience in Europe has shown that bancassurance firms have a lower expense ratio. Insurance distribution can also help the bank to increase the fee-based earnings to a large extent. Banks world over have realized that offering value-added services such as insurance. This helps to popularize insurance as an important financial protection product.
the non-life market requires special management and selling skills. in a credible framework. WHY IS BANCASSURANCE MORE SUITED FOR LIFE INSURANCE PRODUCTS? Traditionally. Portability of pension accounts is a vital requirement which banks can fulfill. a ♣ On the other hand. which require customers to have complete confidence in the institution that invests their money. banks have a better image and are more trusted than insurance companies. a 12|P a g e . a ♣ Life insurance products are generally long-term products. and therefore additional costs. Bank employees are already familiar with financial products and quickly adapt to selling insurance . in many countries. And we now know that. which are not necessarily prevalent in bancassurance.Indian banking is low by international standards. such competencies require significant investment in training and motivation. There are several reasons for this: ♣ The main reason may be the complementary nature of life insurance and banking products. In addition. much fewer non-life insurance products are distributed through bancassurance than life insurance products.based savings or pension products.
it is easy money for the banks as there are no risks and only gains. ♣ PRODUCT DIVERSIFICATION 13|P a g e . Fee Income from bancassurance also reduces the overall customer acquisition cost from the bank’s point of view.♣ Bank advisers can use their knowledge of their customers’ finances to target their advice towards specific needs. At the end of the day. 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. However shrinking interest rate. This kind of revenue stream has been more or less steady over a period of time and growth has been fairly predictable. UTILITIES FOR BANKS ♣ AS A SOURCE OF FEE INCOME Banks’ traditional sources of fee income have been the fixed charges levied on loans and advances. letters of credit and other operations. merchant fee on point of sale transactions for debit and credit cards. credit cards. 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. This is a major advantage in life insurance and less important in personal injury insurance.
which means that most of the customers still 14|P a g e . Simple term life insurance. Bancassurance comes as a help in this direction also. However. Also. through bancassurance a customer gets home loans along with home insurance (fire and theft insurance) at one single place as a combined product. Critical Illness Cover and Return of Premium products which are doing well in the market. Medical insurance. annuities. For example. there are endless opportunities for the banks. endowment policies. banking in India is largely done in the 'brick and mortar' model. Examples of some new and innovative bancassurance products are Income Builder Plan. quite a lot of innovations have taken place in the insurance market recently to provide more and more Bancassurance-centric products.In terms of products. ♣ BUILDING CLOSE RELATIONS WITH CUSTOMERS Increased competition also makes it difficult for banks to retain their customers. home and contents insurance and travel insurance are also the products which are being distributed by the banks. 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. Another important advantage is the development of sales culture in their employees. car insurance. education plans. They are ready to innovate and have set up specialized Bancassurance units within their fold. depositors’ insurance and credit shield are the policies conventionally sold through the Bancassurance channels. Providing multiple services at one place to the customers means enhanced customer satisfaction.
♣ COMBATTING HIGH COST OF AGENTS’ COMMISSION Insurers have been tuning into different modes of distribution because of the high cost of the agents’ commission provided by the insurance companies. Even the oldest public sector insurance companies started facing tough competition. Hence there was a need felt for a CostEffective Distribution channel. UTILITIES FOR INSURANCE COMPANIES ♣ CONQUERING STIFF COMPETITION 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. Hence in order to compete with each other and to stay a step ahead there was a need for a re-strategizing in the form of bancassurance. the customer will have access to a wider product mix . 15|P a g e . In a typical Bancassurance model. These costs became too much of a burden for many insurers compared to the returns they generate from the business. This gave rise to Bancassurance as a channel for distribution of the insurance products. This enables the bank staff to have a personal contact with their customers.walk into the bank branches. encompassing banking and insurance products. It would also benefit the customers in terms of wide product diversification.a rather comprehensive financial services package.
brokers. there was a need felt for bancassurance. subsidiaries etc. The branch network of banks can help spread awareness regarding the same among the rural people opening up a new vista of business for the insurers. the agents sold insurance policies to a more upscale client base. The middle income group people got little attention from the agents. So through the tie-up with banks. In order to fulfill all the needs bancassurance is needed.♣ RURAL PENETRATION Insurance industry has not been very successful in rural penetration of so far. ♣ TARGETING MIDDLE INCOME CUSTOMERS Previously there was a lack of awareness about insurance. the insurance companies get a strong foothold to recapture much of the under served market. 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. 16|P a g e . So in order to utilize the database of the bank’s middle income customers. ♣ MULTI CHANNEL DISTRIBUTION Now-a-days the insurance companies are trying to exploit each and every distribution channel to sell their growing basket of insurance products. People there are still unaware about the insurance as a tool to insure their risks. banks. Formerly. The insurance products are sold through agents.
SOME OF THE BANCASSURANCE TIE-UPS IN INDIA ARE : 17|P a g e .
As per the present norms. 18|P a g e . The question that comes to the fore is who will be more benefited with this move. They will get an opportunity to compare different products and make the best choice. whether banks or insurance companies. an individual will have more options to choose from. a bank cannot have more than one tie-up with an insurance company each in life and non-life segment. as they will get the insurance products of more companies under one roof.Insurance Regulatory and Development Authority (IRDA) is contemplating the idea of permitting banks to have multiple tie-ups with insurance companies. Tables 1 and 2 depicts that one insurance company has tied up with many banks in order to increase their revenues. Customers will be benefited. The positive benefits would be: ♣ Banks can provide multiple options to their customers in terms of insurance products. If this change takes place. but a bank is not allowed to tie-up with more than one insurance company.
Taking advantage of its branch network. SBI Life has reaped the maximum benefits from bancassurance. With more insurance companies tying up with a single bank. it generated almost 39% of its total premium in 2006-07 through bancassurance route. the benefits for the banks will be: Selling of more than one product will give the sellers (banks) a better exposure to compare the plus and minus of each single product. On the Indian front. ♣ It will also help them establish bonds with different insurance companies and negotiate the best prices with them.♣ It will be a boon for the banks since they can earn huge commissions without making any financial investment. Among the third party products. life insurance policies are the highest income generators. and expect equal sale of their products. If customers are buying products of one company then. 19|P a g e ♣ ♣ . Clashes are not ruled out if all insurance companies are providing same amount of commission to banks. and this will make it easier for them to pitch the right product to the right customer based on their needs (need-based selling happens only when you have more products in your basket. other co-partners can blame the bank for favoring the other insurance company. This in turn can hamper customer service. Third party product selling is one powerful avenue. From the sales point of view. They will be providing the products of other companies with the same infrastructure and same employees. Banks' focusing more on this dilutes their focus on core banking services and commitment to any particular insurance company will also dwindle. as is in the case of mutual funds).
LIFE INSURANCE MARKET SHARE FY 2009 Market Share-Private Players INDIA’S POSITION IN INSURANCE MARKET AMONG OTHER COUNTRIES 20|P a g e .
Referral model is nothing but a simple arrangement. STRUCTURAL CLASSIFICATION a) REFERRAL MODEL Banks intending not to take risk could adopt ‘referral model’. There 21|P a g e . In fact a number of banks in India have already resorted to this strategy to begin with.Source-Scribd MODELS OF BANCASSURANCE I. wherein the bank. 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 bank or elsewhere. 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. while controlling access to the clients data base. This model would be suitable for almost all types of banks including the RRBs / CoOperative banks and even Co-Operative societies both in rural and urban.
and packaged with proper incentives in the banks coupled with selling of simple insurance products in the initial stage. b) CORPORATE AGENCY The other form of non-risk participatory distribution channel is that of ‘Corporate Agency’. This model of bancassurance worked well in the US. 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 are also practical difficulties in the form of professional knowledge about the insurance products. Banks to begin with can start with this model and then move on to the other models. c) INSURANCE AS FULLY INTEGRATED FINANCIAL SERVICE/ JOINT VENTURES Apart from the above two. because consumers generally prefer to purchase policies through broker banks that offer a wide range of products from competing insurers.is greater scope in the medium term for this model. however. the fully integrated financial service involves much more comprehensive and intricate relationship between insurer and 22|P a g e . be overcome by intensive training to chosen staff. wherein the bank staff as an institution acts as a corporate agent for the insurance product for a fee/commission. This could. is prone to reputational risk of the marketing bank. 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. however. This.
where the bank functions as fully universal in its operation and selling of insurance products. Insurance is sold as one more item in the list of products offered to the bank’s customer. This may be suitable to relatively larger banks with sound financials and better infrastructure. therefore. PRODUCT BASED CLASSIFICATION (a) STAND-ALONE INSURANCE PRODUCTS This 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. this type of bancassurance seems to have emerged out of necessity in India to an extent. (b) BLEND OF INSURANCE WITH BANK PRODUCTS 23|P a g e . have already taken a lead in resorting to this type of bancassurance model and have acquired sizeable share in the insurance market. II. the products of banks and insurance will have their respective brands too. the foreign insurance company can enter the Indian insurance market only in the form of joint venture. 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.bank. which is a big stride within a short span of time. As per the regulation of insurance sector. however. ICICI Bank and HDFC Bank in private sector and State Bank of India in the public sector.
in recent years. 2000. 1. RBI issued the guidelines on Insurance business for banks. whereas the cardholders get the ‘insurance cover’ for a nominal fee or (implicitly included in the annual fee) free from explicit charges/ premium. specifying ‘Insurance’ as a permissible form of business that could be undertaken by banks under Section 6(1)(o) of The Banking Regulation Act. education loans. 1949. housing loans. Similarly the home loans / vehicle loans. etc.. Many banks in India. In most times. have been aggressively marketing credit and debit card business. etc. Any scheduled commercial bank would be permitted to undertake insurance business as an agent of insurance companies on fee basis without any risk participation 24|P a g e .g. e. have also been packaged with the insurance cover as an additional incentive RBI NORMS ON BANCASSURANCE FOR BANKS Following the issuance of Government of India Notification dated August 3. 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.. credit card.This method aims at blending of insurance products as a ‘value addition’ while promoting the bank’s own products.
ii. The CRAR of the bank should not be less than 10 per cent. The eligibility criteria for joint venture participant is as under: i. 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. more than one public sector bank or private sector bank may be allowed to participate in the equity of the insurance joint venture. In cases where a foreign partner contributes 26% of the equity with the approval of Insurance Regulatory and Development Authority/Foreign Investment Promotion Board. The track record of the performance of the subsidiaries. iv. only those banks which satisfy the criteria given in paragraph 2 above.2. 5. 4. A subsidiary of a bank or of another bank will not normally be allowed to join the insurance company on risk participation basis. As such participants will also assume insurance risk.50 crore. The level of Non-Performing Assets should be reasonable. if any. Banks which are not eligible for ‘joint venture’ participant as above. would be eligible. 25|P a g e . of the concerned bank should be satisfactory. 3. can make investments up to 10% of the net worth of the bank or Rs. v. 500 crore. The net worth of the bank should not be less than Rs. iii. The bank should have net profit for the last three consecutive years. subject to safeguards.
There should be ‘arms length’ relationship between the bank and the insurance outfit. viz. in the insurance company for providing infrastructure and services support. 26|P a g e . Such participation shall be treated as an investment and should be without any contingent liability for the bank. The CRAR of the bank should not be less than 10%. 1999. iii. for divestment of equity in excess of 26 per cent of the paid up capital within a prescribed period of time. insurance business. All banks entering into insurance business will be required to obtain prior approval of the Reserve Bank Of India. The level of NPAs should be reasonable. 7. 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.whichever is lower. The bank should have net profit for the last three consecutive years. The eligibility criteria for these banks will be as under: i.. It should be ensured that risks involved in insurance business do not get transferred to the bank. ii. This will include compliance with Section 6AA of the Insurance Act as amended by the IRDA Act. 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. 6.
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. Banks cannot become insurance brokers. including co-operative banks and RRBs may become corporate agents for one insurance company. 4. IRDA NORMS FOR INSURANCE COMPANIES The Insurance Regulatory & Development Authority has given certain guidelines for Bancassurance. 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. 3. Corporate agents: Commercial banks. Latest audited balance sheet will be considered for reckoning the eligibility criteria. 27|P a g e . 2.8.
it was clearly an impractical necessity and had held up the implementation of bancassurance in the country. Training And Examination Requirements: Upon the Corporate Insurance Executive within the corporate agency. ii. Another regulatory change is published in the 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. 28|P a g e . Prior to this. As the current legislation places the following:i.♣ ISSUES FOR REGULATION: Certain regulatory barriers have slowed the development of bancassurance in India which have only recently been cleared with the passage of the Insurance (Amendment) Act 2002. this barrier has effectively been removed. iii.
♣ Insurers have been turning in ever greater numbers to alternative modes of distribution because of the high costs they have paid for agent services. ♣ 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. So it is one of the methods to increase deposits of banks. is noticed very well that expenses ratio in insurance activities through bancassurance 29|P a g e . These costs became too much of a burden for many insurers compared to the returns they generated. Insurers found that direct relationships with customers gave them greater control of their business at a lower cost. as an important efficiency factor. ♣ Insurers operating through bancassurance hone and control relationships with customers. Insurers who operate through the agency relationships hardly have any control on their relationship with their clients. ♣ The ratio of expenses to premiums.REASONS FOR GROWING PHENOMENA OF BANCASSURANCE ♣ Life insurance premium represents 55% of the world insurance premium and life insurance is basically a saving market.
bancassurance. insurance and brokerage products and services. 30|P a g e . ♣ 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.is extensively low as the bank and the insurance company is benefiting from the same distribution channels and people. The degree to which banks devote themselves to the sale and servicing of insurance varies from country to country and among individual banks. so far. Such innovations would include cross selling of banking. has been principally a European concept. the increased use of the Internet by consumers and a blending of insurance and banking corporate cultures.
Alignment of most Banks for exclusive arrangements BA regulations become clearer. multiple models allowed . as done earlier. OF PLAYERS LIC Monopoly No Private Players allowed DISTRIBUTION FOCUS Agency only 800K LIC agents Agency model replicated Little confidence in BA REGULATOR ENVIRONMENT LIC of India Act Insurance Act 1938 IRDA Act 1999 Primarily Agency driven regulations Source-Google ADVANTAGES TO BANKS ♣ By selling the insurance products through their own channel the banker can increase their income. Broking NO. a ♣ Banks’ funds may be utilized for credit and investment. ♣ Bancassurance helps banks collect non-fund income which can supplement the interest income and increase their profitability. as no funds are involved in bancassurance. a 31|P a g e .GROWTH IN SOME OF THE KEY ELEMENTS UP TO 1999 1999 TILL 2002 Private Players allowed 12 new insurers 2003 ONWARDS 12 Private Players LIC loses 12% share Confidence in BA BA takes 20% + share among Private Players. Referral.CA.
they become more attractive to the customer. Telebanking. 32|P a g e . who can then become the brand ambassador of the bank and offer free of cost advertisement for the bank. ♣ It also gives an opportunity to mobilize deposits because when deposit products of banks are clubbed with low-cost insurance products. because more productive use is made of interactions with the client leading to more overall sales. but when banks start cross-selling bank products and insurance products to the same customer.♣ With intense competition in the banking sector today. etc. they are able to retain their old customers and also attract new customers. if followed by good marketing practices and customer services. a ♣ Cross-selling. a ♣ Banks have extensive experience in marketing their products to existing customers and non-customers. enhances loyalty of a customer. customer retention is becoming a major problem for banks. a ♣ The concept of cross-selling also gives the advantage of improved efficiency for the banks. Technology has made marketing of products easier for the banks. They have number of communication channels like Automated Teller Machines (ATM). SMS Banking. a ♣ Increase in Return On Assets (ROA) by building fee income through the sale of insurance products. This word-ofmouth publicity for the bank is the most effective and positive advertisement for the bank.
" a ♣ The insurance companies can also get access to ATM’s and other technology being used by the banks. investment and purchase capability can be used to customize products and sell accordingly. a ♣ Customer database like customers' financial standing. As ICICI Prudential Life CEO and Managing Director Shikha Sharma has said. a ♣ Customers have more faith in banks and would readily take the advise of a banker whom they have been visiting in the past. a ♣ Insurers can exploit the banks' wide network of branches for distribution of products. rather than trusting a new insurance agent. spending habits. The penetration of banks' branches into the rural areas can be utilized to sell products in those areas. 33|P a g e . ♣ By cutting cost Insurers can serve better to customers in terms lower premium rate and better risk coverage through product diversification.ADVANTAGES : TO INSURERS ♣ The Insurance Company can increase their business through the banking distribution channels because the banks have so many customers. "Maximum contribution from alternate distribution channels comes from the bancassurance route followed by corporate agents and then direct marketing.
a ♣ a Easy accesses for claims. personal loans etc. a ♣ Bancassurance products can give better value for money and offer cheaper premiums to the customer due to the lower distribution costs. a ♣ Bancassurance offers a convenient one-stop financial supermarket to the customer. i. ♣ Innovative and better product ranges designed as per the needs of customers. maximum customers can avail insurance services because for an insurance company it may not be a viable proposal to set up office in the remote corners of the country but public sector banks already have a vast network in the country..e. 34|P a g e . as banks are a regular visiting place for customers. mutual funds. as he is getting all his comprehensive financial advisory services under one roof. a ♣ The system of payment of premium is simplified for the customer. insurance services along with other financial services such as banking. a ♣ Any new insurance product routed through the bancassurance Channel would be well received by customers. He can simply give a standing instruction to his banker for such a transaction.ADVANTAGES : TO CUSTOMERS ♣ With this system of insurance.
35|P a g e . new distribution channels have been developed successfully and rapidly in recent years. but rather due to the use of improperly designed remuneration and incentive packages. They are generally considered to be independent contractors. insurance products were promoted and sold principally through agency systems only. The reliance of insurance industry was totally on the agents. Consequently an insurance company can exercise control only over the activities of the agent which are specified in the contract. not due to the nature of this channel.DISTRIBUTION CHANNELS Traditionally. Many bancassurers. But with new developments in consumers’ behaviours. Such problems with career agents usually arise. believing that agents might oversell out of their interest in quantity and not quality. evolution of technology and deregulation. however avoid this channel. 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. Moreover with the monopoly of public sector insurance companies there was very slow growth in the insurance sector because of lack of competition. Recently Bancassurers have been making use of various distribution channels. they are: ♣ CAREER AGENTS: Career Agents are full-time commissioned sales personnel holding an agency contract.
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. The platform banker may be a teller or a personal loan assistant. those customers who actually visit the branch during the opening hours. The Clients mostly include affluent population who require personalised and high quality service.♣ SPECIAL ADVISERS: Special Advisers are highly trained employees usually belonging to the insurance partner. A restriction on the effectiveness of bank employees in generating insurance business is that they have a limited target market. ♣ 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. 36|P a g e . i. ♣ SALARIED AGENTS: Salaried Agents are an advantage for the bancassurers because they are under the control and supervision of bancassurers. These are similar to career agents. who distribute insurance products to the bank's corporate clients. Usually Special advisors are paid on a salary basis and they receive incentive compensation based on their sales.e. These agents share the mission and objectives of the bancassurers.
♣ INTERNET: Internet banking is already securely established as an effective and profitable basis for conducting banking operations. 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. Functions requiring user input (check ordering. Bancassurers can feel confident that Internet banking will also prove an efficient vehicle for cross selling of insurance savings and protection products. mailing or telephone offers.♣ 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. The consumer purchases products directly from the bancassurer by responding to the company's advertisement. what-if calculations. This channel can be used for simple packaged products which can be easily understood by the consumer without explanation. credit and account 37|P a g e . ♣ 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.
Such an arrangement can also provide a vehicle for insurance sales.applications) should be immediately added with links to the insurer. The changed legislative climate across the world should help migration of bancassurance in this direction. ♣ OUTSIDE LEAD GENERATING TECHNIQUES: One last method for developing bancassurance involves "outside" lead generating techniques. easy distribution and excellent synergy with the internet capabilities. service and leads. success or failure depends on precisely how the process is developed and managed inside each financial institution. The advantage of this medium is scale of operation. Great opportunities await bancassurance partners today and. such as seminars. ♣ E-BROKERAGE: Banks can open or acquire an e-Brokerage arm and sell insurance products from multiple insurers. in most cases. direct mail and statement inserts. strong brands. 38|P a g e .
Product fitment and differentiation Value to Bank Staff Motivation Management Focus and Commitment to shared objectives Successful integration of insurance in Banking activity Value to Customer 39|P a g e .CRITICAL SUCCESS FACTORS Choice of sales model and process Sales structures and resources from Bank and Insurer Leverage of the Bank’s brand Value to Insurance Co.
in India since the majority of the banking sector is in public sector and which has been widely disparaged for the lethargic attitude and poor quality of customer service. There are also glitches in the system of bancassurance strategy in the form of ‘conflict of interests’. Moreover. Studies have revealed that the basic attitudinal incompatibility on the part of employees of banks and insurance companies and the perception of customers about the poor quality of banks had led to failures of bancassurance even in some of the Latin American countries. Else. ‘term deposits’ and other products which are mainly aimed at long term savings/ investments can be very similar to that of the insurance products. it needs to refurbish the blemished image. however. It should. viz. Insurance is a ‘business of solicitation’ unlike a typical banking service. as a 40|P a g e . be recognized that ‘bancassurance’ is not simply about selling insurance but about changing the mindset of a bank.. Banks could as well feel apprehension about the possibility of substitution effect between its own products and insurance products and more so.BANCASSURANCE IN INDIA – SOME ISSUES The difference in working style and culture of the banks and insurance sector needs greater appreciation. it requires great drive to ‘sell/market the insurance products. as some of the products offered by the banks. the bancassurance would be difficult to succeed in these banks.
the banking service. there is no guarantee for insurance products that all efforts that a bank staff spends in explaining to a customer would clinch the deal due to the very nature of the insurance products.number of insurance products in India comes with an added attraction of tax incentives. Unlike. it is suitable only for larger banks. however. As there is a great deal of difference in the approaches of ‘selling of insurance products’ and the usual banking services.thorough understanding of the insurance products by the bank staff coupled with extra devotion of time on each customer explaining in detail of each product’s intricacies is a prerequisite. These can result in resistance to change and leading to problems relating to industrial relations. 41|P a g e . due to improvisation over the existing products as well as due to constant innovation of new products. This frustration of the bank staff has the danger of spill over effect even on their regular banking business. etc. In case the Bancassurance is fully integrated with that of the banking institution. insurance products have become increasingly complex over a period of time. emanating from the excessive competition adding to even more difficulties in comprehension of the products and marketing by the bank staff. Moreover. it has other allied issues such as putting in place ‘proper risk management techniques’ relating to the insurance business.
therefore they require strong motivation of both monetary and non monetary incentives. ♣ ♣ ♣ 42|P a g e . retraining. call-center and product development will be required. Total Customer Relationship Management (CRM) should form the basis of relationship in order to achieve cross-selling. This would be more so in the emerging scenario due to complex innovations in the field of insurance / pension products at a rapid pace with the entry of a number of foreign insurance companies with vast experience in the developed countries’ framework. training. The following should be kept in mind while embarking on the path to bancassurance: ♣ Long-term agreement (minimum 3 to 5 years) should be signed between the two parties. The above outlined problems need not. Reorientation of staff in the public sector banks in particular. deter the banking sector to embark on bancassurance as any form of resistance from the bank employees could be tackled by devising an appropriate incentive system. however. Huge investment in Information Technology (IT) systems. to be less bureaucratic and more customer friendly would indeed be a challenging task.Bankers in India are extremely naïve in insurance products as there were no occasions in the past for the bankers to deal in insurance products. Deciding factors for reaching an agreement should be the brand equity and service standards of the partner rather than price. albeit it is a prerequisite for the success of bancassurance.
A SWOT ANALYSIS 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 also enjoy a wide network of branches. BANCASSURANCE IN INDIA . even in the remotest areas that can facilitate taking up the task on a large and massive scale. ♣ Banks have the credibility established with their constituents because of a variety of services and schemes provided by them. They also enjoy place of pride in the hearts of people because of their long presence and sustained image.♣ The objective should be the creation of the one-stop shop with banks in the role of financial advisors to their clients. ♣ Banks are very well aware of the psychology of the customers because of their interaction with the customers on regular basis. simultaneously. Because of this the 43|P a g e . 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.
♣ To undertake the distribution of the insurance products. ♣ 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. the rural and semi-urban banks have still to see information technology as an enabler.bankers can guess the attitude and diverse needs of the customers and could change the face of insurance distribution to personal line insurance. The internet connections are also not properly provided to the staff. Moreover the standards of the examination have been raised in the recent past making it difficult for many examinees to clear the same. However that may not be the case in regard to a bank employee. followed by a test and then get them licensed. 44|P a g e . the bank employees have to undergo certain minimum period of training. WEAKNESSES: ♣ In spite of growing emphasis on total branch mechanism and full computerization of bank branches. The IT culture is unfortunately missing completely in all of the future collaborations.
e. ♣ The visit of a customer to the bank is to have a simple transaction like deposit or withdrawal.73 million). OPPORTUNITIES: ♣ There is a vast untapped potential waiting to be mined particularly for life insurance products. 45|P a g e . Also. ♣ There are many people in many areas that are still unaware about the risks covered by insurance and its various products and are waiting that somebody should come and give them the information about it. Banks are traditionally “demand-driven” organizations with a reactive selling philosophy. For a bancassurance venture to succeed it is extremely essential to have in-built flexibility so as to make the product customer centric and appealing. ♣ Another drawback is the inflexibility of the products i. the visits in urban or metro branches are going to be fewer because of ATM’s and e-banking. it cannot be tailor made to the requirements of the customer. Busy customers will have no time to have a discussion on a long-term durable purchase like insurance across the counter. 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.♣ There are many differences in the way of thinking and business approaches of bankers and the managers of insurance companies. Insurance organizations are usually “need-driven” and have an aggressive selling philosophy.
burglary insurance and medi-claim insurance and can take advantage of this by cross-selling the insurance products and combine it as a package as value addition to the bank’s core products like credit cards and debit cards etc. This database has to be dissected and various homogeneous groups are to be churned out in order to position the bancassurance products. BANCASSURANCE . which would be an avenue with easy access..♣ There is a good opportunity to market many property related general insurance policies like fire insurance. In most cases banks provide salary disbursement and loan facilities but here they can provide insurance cover as well.INDIAN OPPORTUNITY PF/Retirem ent funds 21% Currency 6% Bank deposits 39% Insurance 13% 2% s nk ba op r. With a good IT infrastructure. this can really do wonders a ♣ Another area that could be of interest to bankers is to exploit the corporate customers and tie up for insurance of the employees of corporate clients. ♣ Banks' database is enormous even though the goodwill may not be the same. Co 3% nt u 's e F C Deb NB & 2% es ar ds Sh un lF ua Governm ent bonds/Sm all Savings 13% ut M 46|P a g e .
similar management and confidence towards one in a venture leading to loss of confidence on the other because consolidated financial reporting etc. 47|P a g e . The work force at every level is so well entrenched in their classical way of working that there is a definite threat of resistance to any change that bancassurance may bring with it. thinking and work culture on the part of everybody involved.e. Any relocation to a new company or subsidiary or change from one work to a different kind of work will not be easily accepted. ♣ 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 like investment and good return products (eg: Fixed Deposit). ♣ There would be a problem of “Reputational Contagion” i. loss of market of identical brand recognition.Source-ICICI Direct THREATS: ♣ Success in bancassurance requires change in approach.
Strong alignments with Banks with cross investments and exclusive Broking arrangements Mergers and Acquisitions could impact the industry Initial Phase Short Term 2004-05 Medium Term 2005-08 Long Term 2010 Onwards Source: Compiled from from Business Line 48|P a g e . no involvement by the branch manager. a stage of realignments may occur Stage of Polarization: Emergence of winners. lack of a sales culture within the bank. inadequate incentives. Insurers partnered with Select Banks under Corp Agency or Referral Change in regulations could impact current arrangements Most Banks have shortterm agreements. poor sales channel linkages. failure to integrate marketing plans. resistance to change. marginal database expertise. negative attitudes toward insurance and unwieldy marketing strategy. FUTURE TRENDS IN BANCASSURANCE Some Banks yet to firm up partnerships. insufficient product promotions.♣ The most common obstacles to success of Bancassurance are poor manpower management.
there is immense potential for further coverage. The per capita premium of $13 in India is also believed to be among the lowest in the world. the insurable population has been estimated to be over 30 crores. Exhibit I: Life Insurance Coverage Levels Indian population Insurable population Insured population % of population covered under insurance Compiled from various sources 100 crores 30 crores 8 crores 27% With only 27% of the insured population covered under insurance. The population covered with some form of insurance has been estimated only at 8 crores (Exhibit I).POTENTIAL FOR BANCASSURANCE IN INDIA In a country with a population of over 100 crores. 49|P a g e . Many rural pockets are yet to be tapped.
80% of the respondents were aware that their bank provided bancassurance services. The following analysis was done on the basis of the survey conducted: ♣ ARE YOU AWARE OF BANCASSURANCE ? No 20% Yes No Yes 80% INTERPRETATION: .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 tied up with. businessmen. also 50|P a g e . etc. professionals. students. These included several housewives.Among those who were surveyed.
♣ HAVE YOU TAKEN AN INSURANCE POLICY FROM YOUR BANK ? Yes 34% No N o 66% Yes INTERPRETATION: Among the people who were surveyed.they were aware about various policies provided by their banks. there were only 34% people who had taken insurance policy from their respective banks. 20% of the respondents were amused with the term bancassurance and didn’t know anything about it and the services provided by their banks. However. Remaining 66% respondents didn’t opt to take a policy from their banks. 51|P a g e .
Out of the people surveyed 63% said that they have taken a loan based insurance. It was either car insurance or a home insurance. Only 18% have taken life insurance cover from the bank and 42% belong to others category.♣ THE KIND OF INSURANCE POLICY TAKEN FROM THE BANK:- 70 60 50 40 30 23% 20 10 0 63% 42% 18% Deposit Based Loan Based Life Insurance Others INTERPRETATION: Maximum number of insurance taken was related to loan. 52|P a g e . There were 23% who have taken insurance which are deposit based because it is a part of the deposit scheme.
53|P a g e .♣ REASONS FOR TAKING AN INSURANCE POLICY:- 90 80 70 60 50 40 30 20 10 0 80% 28% 65% 40% Security Savings Brand Image of bank Brand Image of Insurance Company INTERPRETATION: There was a mixed response from the customers. 65% said that since. 80% said that they took the insurance policy because of security benefits. Only 28% said that savings was a reason that encouraged them to buy insurance policy. they trusted their bank so they took the policy. There were 40% who said that the brand image of the company also mattered.
23% said they would buy insurance from banks because of the brand name and their trust on banks.♣ ON YOUR CHOICE WHICH MODE OF INSURANCE DISTRIBUTION CHANNEL WOULD YOU PREFER TO BUY THE POLICY FROM? Ins uran ce com pan ies 20% Banks 23 % Brokers 7% Age nts 50% INTERPRETATION: 50% people preferred agents because they provide personalized services. 54|P a g e . 20% took insurance from companies because of their trust on the company. Only 7% said that they would buy insurance from brokers.
55|P a g e .♣ WHICH BANK DO YOU FEEL WOULD EXCEL IN BANCASSURANCE ? RATE THEM ACCORDINGLY. The public sector banks were given the least votes because of their lazy approach to work. 70% votes were given to foreign banks because the respondents felt that foreign banks have proper management and aggressive selling strategies. 100 90 80 70 60 50 40 30 20 10 0 90% 70% 38% Public Sector Banks Private Sector Banks Foreign 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.
But 7% believe that because of the emergence of the new technology such as ATM’s.♣ DO YOU THINK BANCASSURANCE HAS A GOOD FUTURE? No 5% Yes No 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. Internet banking etc the banks will soon go virtual so there is not much scope for it. FINDINGS 56|P a g e 95% Yes .
♣ It has also clear from the study that the private sector and the foreign banks have better future in bancassurance than marketing their products separately in several media amongst the plethora of other companies’ products already existent. The insurance companies also have the opportunity to take advantage of the bank’s network and other avenues. ♣ It has been also found out that the banks have various opportunities to cross sell insurance products. They should provide after sales services to the customers. ♣ The banks fail to provide personalized services as are provided by the agents. ♣ It is also seen that customers have a lot of trust on the banks. But still few people don’t know about bancassurance as a concept. So the banks and the insurance companies must tie-up with the right partners. and because of that trust the customers will take the insurance products from banks.♣ Almost many people have a fair idea about bancassurance and that the various insurance products their banks sell. 57|P a g e . But the public sector banks are also trying to give them a tough competition e. So banks will have to improve in that area. ♣ As the brand name of the banks is important so is the brand image of the insurance companies.g. SBI Life Insurance Co. This will help them to create a better image in the minds of the customers.
The cost synergies of integrating banking and insurance operations apart. IT and supportive systems. the issue of bancassurance is laden with several potential risks. Predominantly. inappropriate capital allocation within the group and the distinct possibility of both the partners to aggregate risk exposures rather than acting as a hedge. the new insurance companies have opted for this channel in a bigger way. To name a few . Bancassurance is set to grow at a scorching pace soon becoming a norm and eventually capture equal share of the insurance business as their agency channel. The future will decide the models which would emerge as favorites and the ones which will not make it. 58|P a g e . From the client's point of view bancassurance is a value-added proposition as they would be advised by better trained and more trustworthy bank officials rather than advisors/agents (with exceptions) whose primary consideration. The success of the model to a considerable extent will also be decided by the integration of the human resources in terms of mindset.WHAT LIES AHEAD? The concept is still has now moved forward from its embryonic stage and is rapidly developing and growing but the client preference for this channel has been encouraging and the future looks to be rosy for bancassurance. reengineering. supervisory oversight and enhanced potential for regulatory arbitrage.lack of focus in areas of insufficient managerial experience. it is often said would be their own monetary benefit.
banks have recognized the potential of bancassurance in India and will take equity stakes in insurance companies. viz. The fact that the banking operations in India. unlike in other developed countries. In sum. Supervisory concerns as pointed out earlier could best be tackled by way of closer and systematized coordination between the respective supervisory authorities.the customer. giving wider choice for the customers. are all the more conducive for flourishing of bancassurance. internet banking. etc.. Adequate training coupled with sufficient incentive system could avert the banks’ staff resistance if any. Regulators could explore the possibility of allowing banks having tie-up arrangements with more than one insurance company. are still branch oriented and manually operated vis-à-vis highly mechanized and automated banking channels. This is somewhat similar a trend observed in the United Kingdom and elsewhere where banks started off as distributors of insurance but then moved on to the fully owned insurance subsidiaries. ATMs. in the long run. In addition to acting as distributors. Going by the present pace. therefore banks need to strive towards that direction. 59|P a g e . bancassurance strategy would be a ‘win-win situation’ for all the parties involved . especially in the context of proactive policy environment of regulatory authorities and the Government. the insurance companies and the banks. There needs to be a clear cut identification of activities between banking and insurance at the institution’s level as also at the level of regulators.CONCLUDING REMARKS The success of bancassurance greatly hinges on banks ensuring excellent customer relationship. The changing mindset is cascading through the banking sector in India. bancassurance would turn out to be a norm.