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International Journal of Multidisciplinary Research Vol.2 Issue 2, February 2012, ISSN 2231 5780
FLOURISHING BANCASSURANCE BUSINESS: AN INDIAN PERSPECTIVE

S SARVANAKUMAR*; U.PUNITHA**; S. GUNASEKARAN***; S SANKAR
*Research Scholar & Associate Professor, Department of Management Studies, JKK Nattraja College of Engineering & Technology, Komarapalayam, Namakkal, Tamilnadu. ** Assistant Professor, Department of Business Administration, SSM Arts & Science College, Komarapalayam, Namakkal, Tamilnadu. *** Research Scholar & Assistant Professor, Department of Management Studies, King College of Technology, Komarapalayam, Namakkal, Tamilnadu. **** Assistant Professor, Department of Management Studies, JKK Nattraja College of Engineering & Technology, Komarapalayam, Namakkal, Tamilnadu.
ABSTRACT Bancassurance simply means selling of insurance products by banks. In this arrangement, insurance companies and banks undergo a tie-up, thereby allowing banks to sell the insurance products to its customers. This is a system in which a bank has a corporate agency with one insurance company to sell its products. By selling insurance policies bank earns a revenue stream 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 business of banking around the globe is changing due to integration of global financial markets, development of new technologies, universalization of banking operations and diversification in non-banking 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. 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. Simply put, bancassurance is the process through which insurance products are sold to customers at their local banks. KEYWORDS: Bancassurance, Life Insurance, Referral Model, Corporate Agency, Stand-alone products, Tied products. ___________________________________________________________________________ 1. INTRODUCTION The business of banking around the globe is changing due to integration of global financial markets, development of new technologies, universalization of banking operations and diversification in non-banking 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. It simply means selling of insurance products by banks to its customers. In this arrangement, insurance companies and banks
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undergo a tie-up, thereby allowing banks to sell the insurance products. This is a system in which a bank has a corporate agency with one insurance company to sell its products. By selling insurance policies bank earns a revenue stream apart from their banking business. 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. Bancassurance has grown at different places and taken shapes and forms in different countries depending upon demography, economic and legislative prescriptions in that country. Bancassurance, the sale of life insurance and pensions products through a bank, has proved to be an effective distribution channel in a number of countries. In a broad sense, bancassurance is the distribution of insurance products to a banks client base. However, beyond this definition, bancassurance business models vary widely from country to country. Bancassurance is a new buzzword in India. It originated in India in the year 2000 when the Government issued notification under Banking Regulation Act which allowed Indian Banks to do insurance distribution. It started picking up after Insurance Regulatory and Development Authority (IRDA) passed a notification in October 2002 on 'Corporate Agency' regulations. As per the concept of Corporate Agency, banks can act as an agent of one life and one non-life insurer. Currently bancassurance accounts for a share of almost 25 to 30% of the premium income amongst the private players in India. 2. STATEMENT OF THE PROBLEM The Indian insurance sector has undergone a big change in the last decade, ever since the sector was opened up for private players. Traditionally, insurance products are sold only through individual agents and they account for a major chunk of the business in retail segment. With the opening up of this sector to private players, competition has become more intense and the public sector major LIC has been challenged with a flood of new products and new means of marketing. Insurance industry in India has been progressing at a rapid pace since opening up of the sector to the entry of private companies 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. 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. Simply put, bancassurance is the process through which insurance products are sold to customers at their local banks. With banking network of 65,000 branches serving more than 400 million retail banking customers, insurance can be available at affordable prices to people even in remote corners of the country. 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, 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
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far to go. But one thing stands obvious. If insurance in India is to succeed, it can only be through the Bancassurance channel.
2.1. GROWTH OF LIFE INSURANCE BUSINESS IN INDIA In India life insurance business is growing day by day. The FYP including Single premium is shown below: LIFE INSURANCE PREMIUM (FYP)
(Rs. Crore) Insurer 2008-09 53179.0 8 (-11.36) 31.21 724.56 4491.43 292.93 2823.91 296.41 3.37 149.97 2651.11 6483.92 316.78 688.95 2007-08 59996.5 7 (6.71) 1053.98 6674.48 113.24 1965.01 2.49 2685.37 8034.75 11.90 704.44 2006-07 56223.5 6 (97.17) 721.35 4302.74 7.78 882.72 1648.85 5162.13 467.66 2005-06 28515.8 7 (38.07) 407.12 2716.77 678.12 1042.65 2602.50 283.98 2004-05 20653.0 6 (19.05) 192.29 857.45 621.31 486.15 1584.34 282.42 2003-04 2002-03 17347.6 2 (8.58) 76.96 179.55 449.86 209.33 750.84 72.10 15976.7 6 (-18.44) 13.47 63.39 129.57 129.31 364.11 17.66 2001-02 19588.7 7 (101.93) 7.14 28.11 32.78 113.33 4.19 www.zenithresearch.org.in
LIC (Growth) Aegon Religare Aviva Bajaj Allianz Bharti Axa Birla Sunlife Canara HSBC DLF Pramerica Future Generali HDFC Standard ICICI Prudential IDBI Fortis ING Vysya
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Kotak Mahindra Met Life Max NewYork Reliance Life Sahara SBI Life Shriram Star Union Tata AIG Private Total (Growth) Industry Total (Growth)
1343.03 1144.7 1842.91 3513.98 134.01 5386.64 314.47 50.19 1142.67 33827.1 5 (0.33) 87006.2 3 (-7.16)
1106.62 825.35 1597.83 2751.05 122.12 4792.82 309.99 964.51 33715.9 5 (73.56) 93712.5 2 (23.88)
614.94 340.44 912.11 932.11 43.00 2563.84 181.17 644.82 19425.6 5 (88.84) 75649.2 1 (94.96)
396.06 148.53 471.36 193.56 26.34 827.82 10.33 464.53 10269.6 7 (84.55) 38785.5 4 (47.94)
373.99 57.52 233.63 91.33 1.74 484.85 297.55 5564.57 (127.99 ) 26217.6 4 (32.49)
125.51 23.41 137.28 27.21 207.05 181.59 2440.71 (152.74 ) 19788.3 2 (16.80)
35.21 7.70 67.31 6.32 71.88 59.77 965.69 (259.65 ) 16942.4 5 (-14.68)
7.58 0.48 38.80 0.28 14.69 21.14 268.51 (4061.7 0) 19857.2 8 (104.56)
Source: IRDA FYP Stands for First Year Premium 3. OBJECTIVES OF THE STUDY This study makes an attempt in this direction with the following objectives. 1. To examine the recent trends of bancassurance business in India. 2. To analyze the different bancassurance verticals offered by Indian banks. 3. To find about the multi-face of bancassurance business. 4. To know the issues regarding marketing of insurance products through bancassurance mode. 4. RECENT TRENDS OF BANCASSURANCE IN INDIA Bancassurance is quiet embryonic in South Asia and this is still in infancy in India and it is too early to assess the exact position. However, a quick survey revealed that a large number of banks cutting across public and private and including foreign banks have made use
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of the bancassurance channel in one form or the other in India. Banks by and large are resorting to either referral models or corporate agency to begin with. Banks even offer space in their own premises to accommodate the insurance staff for selling the insurance products or giving access to their clients database for the use of the insurance companies. As number of banks in India have begun to act as corporate agents to one or the other insurance company, it is a common sight that banks canvassing and marketing the insurance products across the counters. The present Insurance Regulatory bodys regulation, however, restricts bankers to act as a corporate agent on behalf of only one life and general insurance company. In the case of ICICI Prudential Life Insurance Company, within two years of its operations, it could reach more than 25 major cities in India and as much as 20 per cent of the life insurance sales are through the bancassurance channel. In the case of ICICI bank, SBI and HDFC bank insurance companies are subscribers of their respective holding companies. ICICI bank sells its insurance products practically at all its major branches, besides it has bancassurance partnership arrangements with 19 other banks as also as many as 200 corporate tie-up arrangements. Thus, among the private insurance companies, ICICI Prudential seems to exploit the bancassurance potential to the maximum. ICICI stated that Bank of India has steadily grown the life insurance segment of its business since its inception. ICICI prudential had also reported to have entered into similar tie-ups with a number of Regional Rural Banks, to reap the potential of rural and semi-urban. In fact, it is a step in the right direction to tap the vast potential of rural and semi-urban market. It will not be surprising if other insurance companies too follow this direction. Aviva Insurance had reported that it has tie-ups with as many as 22 banking companies, which includes private, public sector and foreign banks to market its products. Similarly, Birla Sun Life Insurance Company reported to have tie-up arrangements with 10 leading banks in the country. A distinct feature of the recent trend in tie-up arrangements was that a number of cooperative banks have roped in with bancassurance arrangement. This has added advantage for insurer as well as the cooperative banks, such as the banks can increase the non-fund based income without the risk participation and for the insurers the vast rural and semi-urban market could be tapped without its own presence. Bancassurance alone has contributed richly to as much as 45 per cent of the premium income in individual life segment of Birla Sun Life Insurance. Incidentally even the public sector major Life Insurance Corporation reported to have tie-up with 34 banks in the country, it is likely that this could be the largest number of banks selling single insurance companys products. Ironically, Life Insurance Corporation also has the distinction of being the oldest and the largest presence of its own in the country. SBI Life Insurance for instance, is uniquely placed as a pioneer to usher bancassurance into India. The company has been extensively utilizing the SBI Group as a platform for crossselling insurance products along with its numerous banking product packages such as housing loans, personal loans and credit cards. SBI has distinct advantage of having access to over 100 million accounts and which provides it a vibrant and largest customer base to build insurance selling across every region and economic strata in the country. In 2004, the company reported to have become the first company amongst private insurance players to cover 30 lakh lives. Interestingly, in respect of new life insurance business bancassurance business channel is even greater than the size of direct business by the insurers at 2.17 per cent. Even in respect of LIC around 1.25 per cent of the new business is through bancassurance. Considering the large base, even this constitutes quite sizeable to begin with in the case of LIC. This speaks for itself the rate at which the bancassurance becoming an
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important channel of distribution of insurance products in India. It is significant to note that the public sector giant LIC which has branches all over India, too moving towards making use of bancassurance channel. 5. BANCASSURANCE MODELS At present in India, the entire bancassurance business models can be classified into two types, on the basis of structural classification and on the basis of product based classification. This can be explained in detail below. 5.1. ON THE BASIS OF STRUCTURAL CLASSIFICATION A) REFERRAL MODEL At the outset banks anticipating not to take risk could adopt referral model wherein they merely part with their client data base for business lead for commission. The actual transaction with the prospective client in referral model is done by the employees of the insurance company either at the premise of the bank or elsewhere. Referral model is nothing but a simple arrangement, wherein the bank, while controlling access to the clients data base, parts with only the business leads to the agents or 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 Regional Rural Banks, 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 resorts to this model and then move on to the other models. B) CORPORATE AGENCY The further arrangement of non-risk participatory distribution channel is that of corporate agency, wherein the bank employee are especially a staff and branch manager, trained to appraise and sell the products to the customers. Here the bank as an institution acts as corporate agent for the insurance products for a fee or commission. This seems to be more viable and appropriate for most of the mid-sized banks in India as also the rate of commission would be relatively higher than the referral arrangement. This, however, is prone to reputation risk of the marketing bank. Here are also practical difficulties in the form of professional knowledge about the insurance products. Besides, resistance from staff to handle totally new service could not be ruled out. This could, however, be overcome by intensive training to chosen staff packaged with proper incentives in the banks coupled with selling of simple insurance products in the initial stage. This model is best suited for majority of banks including some major urban cooperative banks because neither there is sharing of risk nor does it require huge investment in the form of infrastructure and yet could be a good source of income. Bajaj Allianz stated to have established a growth of 325 per cent during AprilSeptember 2004, mainly due to bancassurance strategy and around 40% of its new premiums business. Interestingly, even in a developed country like US, banks stated to have preferred to focus on the distribution channel akin to corporate agency rather than underwriting business. Several major United States banks including Wells Fargo, Wachovia and BB & T built a large distribution network by acquiring insurance brokerage business. This model of bancassurance worked well in the United States, because consumers generally prefer to
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purchase policies through broker banks that offer a wide range of products from competing insurers.
C) FULLY INTEGRATED FINANCIAL SERVICE 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. Banks are equipped with a counter within to sell the insurance products as an internal part of its activities. This includes banks having a wholly owned insurance subsidiary with or without foreign participation. In Indian case, ICICI bank and HDFC banks in private sector and State Bank of India in the public sector, have already taken a lead in resorting to this type of bancassurance model and have acquired sizeable share in the insurance market, also made a big stride within a short span of time. 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. Internationally, the fully integrated bancassurance have demonstrated superior performance. Even if the banking company forms as a subsidiary and insurance company being a holding company, this could be classified under this category, so long as the bank is selling the insurance products along side the usual banking services. As per the extant regulation of insurance sector the foreign insurance company could enter the Indian insurance market only in the form of joint venture, therefore, this type of bancassurance seems to have emerged out of necessity in India to an extent. There is great scope for further growth both in life and non-life insurance segments as Government of India is reported have been actively considering to increase the Foreign Direct Investments participation to the up to 49 per cent. 5.2. PRODUCT-BASED CLASSIFICATION A. STAND-ALONE PLANS 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. Insurance is sold as one more item in the menu of products offered to the banks customer, however, the products of banks and insurance will have their respective brands too, e.g., Karur Vysya Bank Ltd selling of life insurance products of Birla Sun Insurance or non-life insurance products of Bajaj Allianz General Insurance Company. B) BLENDED WITH BANK PRODUCTS With the financial integration both within the country and globally, insurance is increasingly being viewed not just as a stand alone product but as an important item on a menu of financial products that helps consumers to blend and create a portfolio of financial assets, manage their financial risks and plan for their financial security and well being. This strategy aims at blending of insurance products as a value addition while promoting its own products. Thus, banks could sell the insurance products without any additional efforts. In most times, giving insurance cover at a nominal premium or sometimes without explicit premium does act as an added attraction to sell the banks own products, for example credit
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card, housing loans, education loans, etc. Many banks in India, in recent years, has been aggressively marketing credit and debit card business, whereas the cardholders get the insurance cover for a nominal fee or free from explicit premium. Similarly the home loans, vehicle loans, etc., have also been packaged with the insurance cover as an additional incentive. 6. BANCASSURANCE IN INDIA SOME ISSUES The difference in working style and culture of the banks and insurance sector needs greater appreciation. Insurance is a business of solicitation unlike a typical banking service; it requires great drive to market the insurance products. It should, however, be recognized that bancassurance is not simply about selling insurance but about changing the mindset of a bank. Moreover, 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, it needs to refurbish the blemished image. Else, the bancassurance would be difficult to succeed in these banks. 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. There are also glitches in the system of bancassurance strategy in the form of conflict of interests, as some of the products offered by the banks, viz., term deposits and other products which are mainly aimed at long term savings and/or investments can be very similar to that of the insurance products. Banks could as well feel apprehension about the possibility of substitution effect between its own products and insurance products and more so, as a number of insurance products in India come with an added attraction of tax incentives. In case the Bancassurance is fully integrated with that of the banking institution, it is suitable only for larger banks; however, it has other allied issues such as putting in place proper risk management techniques relating to the insurance business, etc. 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 products intricacies is a prerequisite. Moreover, insurance products have become increasingly complex over a period of time, due to improvisation over the existing products as well as due to constant innovation of new products, emanating from the excessive competition adding to even more difficulties in comprehension of the products and marketing by the bank staff. These can result in resistance to change and leading to problems relating to industrial relations. Unlike, 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. This frustration of the bank staff has the danger of spill over effect even on their regular banking business. Bankers in India are extremely nave in insurance products as there were no occasions in the past for the bankers to deal in insurance products; therefore they require strong motivation of both monetary and non monetary incentives. This would be more so in the emerging scenario due to complex innovations in the field of insurance or pension products at a rapid pace with the entry of a number of foreign insurance companies with vast experience in the developed countries framework. In view of the above, reorientation of staff in the
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public sector banks in particular, to be less bureaucratic and more customers friendlier would indeed be a challenging task, albeit it is a prerequisite for the success of bancassurance. With the financial reforms and technological revolution embracing the financial system, there has been a great deal of flexibility in the mind set of people to accept change. The above outlined problems need not, however, 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 commensurate with intensive training to the frontline bank staff. 7. BANCASSURANCE AND ITS MULTI-FACE Bancassurance is a win-win model for insurance companies and banks. Insurance companies, with their relatively limited infrastructure, were able to sell their products throughout the country by using the distribution channel of bank branches. At the same time, banks, without investing in additional resources or infrastructure, were able to earn a feebased income, to supplement their core lending activities. Bancassurance simply means selling of insurance products by banks. The Insurance Regulatory and Development Authority notification in 2002 saw the banks begin to act as agents for one life and general insurer, each. In this alliance between insurance companies and banks, banks were allowed to sell insurance products to their customers. Under this arrangement, banks are appointed as corporate agents, empanelled with one insurance company to sell its products. Banks, with their existing customer base, can leverage on their existing relationships, to convert customers into policyholders. The bank usually earns a high commission on the first premium paid by each customer and marginal trailing commissions on renewal premiums till the maturity of the policy, for regular premium plans. And a one-time commission is paid in case of the single premium policies. 7.1. STRENGTHS OF BANKS In the insurance market, there are currently 20 private players along with the public sector giant Life Insurance Corporation. Out of these companies, the early birds had the advantage of entering into a tie-up with commercial banks and cooperative banks for exclusive bancassurance arrangements. In India, the bank branch network encompasses nearly 75,000 branches inclusive of Public Sector Undertaking and private banks. Close to 1,00,000 branches of co-operative, district co-operative and regional rural banks also exist. Normally, commercial banks act as a corporate agent and tie-up with one insurance company. Co-operative banks act as corporate agents or as referral agents. The fee-based income for the bank varies based on whether they operate as a corporate agent these will earn higher commissions than for referral agents, where selling is executed by the insurance companies themselves. 7.2. REWARDS FOR THE INSURANCE COMPANY Through this new distribution network, the insurance company significantly extends its customer base and enjoys access to customers who were previously difficult to reach. This is obviously a fundamental advantage; it is itself enough to convince an insurance company to ally itself with a bank. The insurance company has the opportunity to vary its distribution methods, in order to avoid excessive dependence on a single network. Diversification reduces risk of the investments. The insurance company often benefits from the trustworthy image and reliability that people are more likely to attribute to banks. The insurance company also
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benefits from the reduction in distribution costs relative to the costs inherent in traditional sales representatives, since the sales network is generally the same for banking products and insurance products. These cost savings have been recognized by many bancassurance operators around the world and are therefore carried over into the costs included in contracts. This means that products can be sold more cheaply. An insurance company can establish itself more quickly in a new market, using a local banks existing network. 7.3. ADVANTAGES FOR THE BANK First of all, the bank sees bancassurance as a way of creating a new revenue flow and diversifying its business activities. This advantage was all the greater in the early 1990s, a period characterized by increased competition between financial institutions and a reduction in the banks profit margins and, therefore, the need to look for new business. The bank becomes a sort of supermarket, a one-stop shop for financial services, where all customers needs whether financial or insurance related can be met. The broadening of its product range makes the bank more attractive and can reinforce customer satisfaction and therefore customer loyalty. The distribution costs can be seen as marginal since, in most cases, it is the banks existing employees who sell the insurance products. Amongst other things, the onestop shop model optimizes the use of the network and increases the profitability of the existing branch network. 7.4. ADVANTAGES FOR THE CONSUMER As mentioned among the advantages for the bank, the consumer enjoys greater access to all financial services from a bank that offers both banking and insurance products. Since the distribution costs are lower than in a traditional distribution network, the consumer can usually get cheaper insurance products than through traditional channels. In addition, premium payment methods are simplified, since premiums are collected directly from bank accounts. The special relationship between the customer and the bank means that there is a better match between what the customer needs and the solutions provided by the bank. In summary, we would say that customers benefit from the opportunity to get simple, often inexpensive insurance products with a premium payment system adapted to their needs usually monthly installments - and with easy access, since the branch network is usually denser than the network of insurance outlets. 7.5. DISADVANTAGE One disadvantage that has come up in this model is that banks, after allying with one insurance company may discontinue it to set up their own venture. Changing insurance partners due to attractive benefits offered by a competing insurer is also not ruled out. Mergers and takeover situations may also lead to a rejoin in bancassurance partners. The bancassurance channel accounts for about 25 per cent of the total new premium collected by the industry as of today. For insurers, based on the business strategy and the number of tieups, the contribution of bancassurance varies. 7.6. UNTAPPED MARKET POTENTIAL The penetration of life insurance as a whole is abysmally low at 4.1 per cent of Gross Domestic Product. Bancassurance currently accounts for one fourth of the total new premium collected. Going by the number of the branches selling insurance products, it appears that it is
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yet to attain critical mass. Out of the over 1.75 lakh branches of commercial and co-operative banks, hardly one-fourth are engaged in selling insurance products. If more and more branches start to sell insurance products, particularly the cooperative banks, the penetration of insurance may increase substantially. 7.7. MICRO INSURANCE Micro insurance which is at a miniscule level to the overall businesses may also undergo dramatic change. Insurance companies may have to prepare for more investments in technology to allow processing and issue of policies at the respective towns, to make the process cost-effective. There is also scope for banks to explore other models of bancassurance. The major part of business in bancassurance still happens only at the branch. The other streams such out of branch model and private banking and wealth management is yet to pick up to a large extent. One possibility suggested by some insurers is that banks can approach the insurance regulator to change the regulations, so that banks can upgrade themselves from a corporate agent setup to broker model. This would allow them to sell a wider range of products. In urban areas, there can be specialized branches where instead of selling one life product, they can offer a menu of options within life insurance. The customer will have the option to select a product that is more suitable to him, rather than buying products merely by virtue of a relationship with the bank. 8. CONCLUSION The success of bancassurance greatly hinges on banks ensuring excellent customers relationship; therefore banks need to strive towards that direction. The changing mindset is cascading through the banking sector in India and this would be a right time for banks to resorting to bancassurance, especially in the context of proactive policy environment of regulatory authorities and the Government. Regulators could explore the possibility of allowing banks having tie-up arrangements with more than one insurance company, giving wider choice for the customers. In addition to acting as distributors, banks have recognized the potential of bancassurance in India and will take equity stakes in insurance companies, in the long run. 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. Going by the present pace, bancassurance would turn out to be a norm rather than an exception in future in India. Supervisory concerns as pointed out earlier could best be tackled by way of closer and systematized coordination between the respective supervisory authorities. There needs to be a clear cut identification of activities between banking and insurance at the institutions level as also at the level of regulators. Adequate training coupled with sufficient incentive system could avert the banks staff resistance if any. In sum, bancassurance strategy would be a win-win situation for all the parties involved - the customer, the insurance companies and the banks. 9. REFERENCES [1] Abheek Barua, (2004), Bancassurance - New concept Catching up Fast in India, The Chartered Accountant, Vol.23, No 8, pp.56-67. [2] Dr. R. Neelamegam and K. Pushpa Veni, (2008), Bancassurance Am emerging concept in India, Journal of Insurance and Risk Management, Vol. 12, pp.78-91.
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[3] Government of India (1994), Report of the Committee on Reforms in the Insurance sector Malhotra Committee Report, New Delhi. [4] Karunagaran A (2005), Towards Universal Banking in India Some Regulatory and Supervisory Issues, IBA Bulletin, January, Vol. XXVII, No 1, pp.146-159. [5] Karunakaran. A (2006), Bancassurance: A Feasible Strategy for Banks in India, Reserve Bank of India, Occasional Papers, Vol. 27, No. 3, pp.34-45. [6] Krishnamurthy R (2003), Blueprint for Success Bringing bancassurance to India, IRDA Journal, pp.20-23. [7] Krishnapani Kesiraj (2003), Bancassurance an Introduction, ICFAI Press, Hyderabad. [8] Olson W Mark (2004), Regulatory update in Banking industry, Insurance and Securities activities, Remarks at the Bank Insurance and Securities Association Legislative, Regulatory and Compliance Seminar, Washington. [9] Ranade Ajit and Ahuja Rajeev (1999), Life Insurance in India: Emerging Issues, Economic and Political Weekly, January 16-22/ 23-29, Vol. XXXIV, No 3 and 4. Mumbai.
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ZENITH

FLOURISHING BANCASSURANCE BUSINESS: AN INDIAN PERSPECTIVE

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