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Executive Summary

The Banking and Insurance industries have changed rapidly in

the changing and challenging economic environment throughout the
world. In this competitive and liberalized environment everyone is trying
to do better than others and consequently survival of the fittest has come
into effect.

This has given rise to a new form of business wherein two big
financial institutions have come together and have integrated all their
strength and efforts and have created a new means of marketing and
promoting their products and services. On one hand it is the Banking
sector which is very competitive and on the other hand is Insurance sector
which has a lot of potential for growth. When these two join together, it
gives birth to BANCASSURANCE.

Bancassurance is nothing but the collaboration between a bank

and an insurance company wherein the bank promises to sell insurance
products to its customers in exchange of fees. It is a mutual relationship
between the banks and insurers. A relationship which amazingly
complements each other’s strengths and weaknesses.

It is a new buzz word in India but it is taking roots slowly and

gradually. It has been accepted by banks, insurance companies as well as
the customers. It is basically an international concept which is spreading
all around the world and is favored by all.

Taking all these things into consideration I would like to

present my project “BANCASSURANCE (an emerging concept in
India). The project flashes some light on Bancassurance and how it is
perceived by people in India. It deals with the conceptual part of
Bancassurance as well as its practical applications in India.

The main focus of this project is on benefits and importance of

Bancassurance in India. The regulations governing Bancassurance are
also dealt with in this project. SWOT analysis is also done so as to
identify the various opportunities and threats for Bancassurance in India.

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The Indian as well as Global contexts both are taken into

account. The project also revolves around data, facts and figures that are
necessary to prove the importance of Bancassurance.

Further the project also includes the case study of SBI Life
Insurance Company, its various products, the growth they have
experienced since the opening up of a wholly owned subsidiary of SBI
Bank that sells insurance products.

A survey analysis has also been done so as to know the

popularity and the growth perspectives of Bancassurance. The survey
tries to identify whether the conditions are favourable for it India or not.
At the end some suggestions are also given to fill the potholes that still
exist in this system.

This project is just a gist about how the Globalization,

Liberalization and tough Competition have brought the Banking as well
as the Insurance Industries together to help each other and to provide
excellent services to the customers.

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Chapter 1

 History of Banking in India.

1. Definition
2. History

 History of Insurance in India

1. Definition
2. History

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Introduction to Banking

Banking as per the Banking Regulation Act, Banking is defined as: -

“accepting for the purpose of lending of

deposits of money from the public for the purpose of
lending or investment, repayable on demand through
cheques, drafts or order.”

A sound and effective banking system is necessary for a healthy

economy. The banking system of India should not only be hassle free but
it should be able to meet new challenges posed by the technology and any
other external and internal factors. Many new things have come up in the
banking sector in the recent years. Banks have adopted the new
technology because banking has not remained up to accepting and
lending but now it is all about satisfying the needs of the customers.

The development of the Indian banking sector has been

accompanied by the introduction of new norms. New services are the
order of the day, in order to stay ahead in the rat race. Banks are now
foraying into net banking, securities, and consumer finance, housing
finance, treasury market, merchant banking etc.They are trying to provide
every kind of service which can satisfy or rather we should say that it can
delight the customers.

Entry of private and foreign banks in the segment has provided

healthy competition and is likely to bring more operational efficiency into
the sector. Banks are also coping and adapting with time and are trying to

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become one-stop financial supermarkets. The market focus is shifting

from mass banking products to class banking with the introduction of
value added and customized products.

Introduction to Insurance Sector

Insurance may be defined as: -

“It is a contract between two parties where by

one party undertakes to compensate the another party for
the loss arising due to an uncertain events for which the
another party agrees to pay a certain amount regularly.”

In India, insurance has a deep-rooted history. Insurance in India

has evolved over time heavily drawing from other countries, England in
particular. The insurance sector in India has come a full circle from being
an open competitive market to nationalization and back to a liberalized
market again. The business of life insurance in India in its existing form
started in India in the year 1818 with the establishment of the Oriental
Life Insurance Company in Calcutta.

The Insurance Act, 1938 was the first legislation governing all
forms of insurance to provide strict state control over insurance
business.Today there are 14 general insurance companies and 14 life
insurance companies operating in the country. But today also the
insurance companies are trying to capture Indian markets as not many
people are aware of it.

The insurance sector is a colossal one and is growing at a

speedy rate of 15-20%. Together with banking services, insurance

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services add about 7% to the country’s GDP. A well-developed and

evolved insurance sector is a boon for economic development as it
provides long- term funds for infrastructure development at the same time
strengthening the risk taking ability of the country.

Chapter 2

 About Bancassurance

1. Meaning

2. Origin

3. Models of Bancassurance

i. Structural classification

ii. Product based classification

iii. Bank Referrals

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What is BANCASSURANCE?

With the opening up of the insurance sector and with so

many players entering the Indian insurance industry, it is required by the
insurance companies to come up with innovative products, create more
consumer awareness about their products and offer them at a competitive
price. Since the banking services, insurance and fund management are all
interrelated activities and have inherent synergies, selling of insurance by
banks would be mutually beneficial for banks and insurance companies.
With these developments and increased pressures in combating
competition, companies are forced to come up with innovative techniques
to market their products and services. At this juncture, banking sector
with it's far and wide reach, was thought of as a potential distribution
channel, useful for the insurance companies. This union of the two
sectors is what is known as Bancassurance.

Meaning
Bancassurance is the distribution of insurance products through the
bank's distribution channel. It is a phenomenon wherein insurance
products are offered through the distribution channels of the banking
services along with a complete range of banking and investment products
and services. To put it simply, Bancassurance, tries to exploit synergies
between both the insurance companies and banks.

Bancassurance can be important source of revenue. With the increased

competition and squeezing of interest rates spread, profits are likely to be
under pressure. Fee based income can be increased through hawking of
risk products like insurance.

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Bancassurance if taken in right spirit and implemented properly can be

win-win situation for the all the participants' viz., banks, insurers and the
customer.

Origin

The banks taking over insurance is particularly well-documented with

reference to the experience in Europe. Across Europe in countries like
Spain and UK, banks started the process of selling life insurance decades
ago and customers found the concept appealing for various reasons.

Germany took the lead and it was called “ALLFINANZ”. The system of
bancassurance was well received in Europe. France taking the lead,
followed by Germany, UK, Spain etc. In USA the practice was late to
start (in 90s). It is also developing in Canada, Mexico, and Australia.

In India, the concept of Bancassurance is very new. With the

liberalization and deregulation of the insurance industry, bancassurance
evolved in India around 2002.

Models of Bancassurance
I. Structural Classification

a) Referral Model

Banks intending not to take risk could adopt ‘referral model’

wherein they merely part with their client data base for business lead of
commission. The actual transaction with the prospective client in referral
model is done by the staff of the insurance company either at the
premises of the ban0k or elsewhere. Referral model is nothing but a
simple arrangement, wherein the bank, while controlling access to the

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clients data base, parts with only the business leads to the agents/ sales
staff of insurance company for a ‘referral fee’ or commission for every
business lead that was passed on. In fact a number of banks in India have
already resorted to this strategy to begin with. This model would be
suitable for almost all types of banks including the RRBs /cooperative
banks and even cooperative societies both in rural and urban. There is
greater scope in the medium term for this model. For, banks to begin with
can resort to this model and then move on to the other models.

b) Corporate Agency

The other form of non-sick participatory distribution

channel is that of ‘Corporate Agency’, wherein the bank staff as an
institution acts as corporate agent for the insurance product for a
fee/commission. This seems to be more viable and appropriate for most
of the mid-sized banks in India as also the rate of commission would be
relatively higher than the referral arrangement. This, however, is prone to
reputational risk of the marketing bank. There are also practical
difficulties in the form of professional knowledge about the insurance
products. 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. This model of bancassurance worked well in the US, because
consumers generally prefer to purchase policies through broker banks that
offer a wide range of products from competing insurers.

c) Insurance as Fully Integrated Financial Service/ Joint

ventures

Apart from the above two, the fully integrated financial service
involves much more comprehensive and intricate relationship between
insurer and bank, where the bank functions as fully universal in its
operation and selling of insurance products is just one more function
within. This includes banks having wholly owned insurance subsidiaries
with or without foreign participation. The great advantage of this strategy
being that the bank could make use of its full potential to reap the benefit
of synergy and therefore the economies of scope. This may be suitable to
relatively larger banks with sound financials and has better infrastructure.

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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 GOI is
reported have been actively considering to increase the FDI’s
participation up to 49 per cent.

II. Product based classification

(a) Stand-alone Insurance Products

In this case bancassurance involves marketing of the
insurance products through either referral arrangement or corporate
agency without mixing the insurance products with any of the banks’ own
products/ services. Insurance is sold as one more item in the menu of
products offered to the bank’s customer, however, the products of banks
and insurance will have their respective brands too.

(b) Blend of Insurance with Bank Products

This method aims at blending of insurance products as a

‘value addition’ while promoting the bank’s own products. Thus, banks
could sell the insurance products without any additional efforts. In most
times, 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, e.g., credit 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 (implicitly included in the annual fee) free from
explicit charges/ premium. Similarly the home loans / vehicle loans, etc.,
have also been packaged with the insurance cover as an additional
incentive.

III. Bank Referrals

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There is also another method called 'Bank Referral'. Here the

banks do not issue the policies; they only give the database to the
insurance companies. The companies issue the policies and pay the
commission to them. That is called referral basis. In this method also
there is a win-win situation every where as the banks get commission, the
insurance companies get databases of the customers and the customers
get the benefits.

Chapter 3

 Utilities of Bancassurance

1. For Banks:
i. As a source of fee based income
ii. Product diversification
iii. Building close relations with the customers

2. For Insurance Companies

i. Stiff competition
ii. High cost of agents
iii. Rural penetration
iv. Multi-channel distribution
v. Targeting middle income customers

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For Banks

 As a source of fee income

Banks’ traditional sources of fee income have been the
fixed charges levied on loans and advances, credit cards, merchant fee on
point of sale transactions for debit and credit cards, letter of credits and
other operations. This kind of revenue stream has been more or less
steady over a period of time and growth has been fairly predictable.
However shrinking interest rate, 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. Fee income from the distribution of insurance
products has opened new horizons for the banks and they seem to love it.

From the banks’ point of view, opportunities and

possibilities to earn fee income via Bancassurance route are endless. 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. Fee Income from Bancassurance also reduces the overall

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customer acquisition cost from the bank’s point of view. At the end of the
day, it is easy money for the banks as there are no risks and only gains.

 Product Diversification

In terms of products, there are endless opportunities for

the banks. Simple term life insurance, endowment policies, annuities,
education plans, depositors’ insurance and credit shield are the policies
conventionally sold through the Bancassurance channels. Medical
insurance, car insurance, home and contents insurance and travel
insurance are also the products which are being distributed by the banks.
However, quite a lot of innovations have taken place in the insurance
market recently to provide more and more Bancassurance-centric
products to satisfy the increasing appetite of the banks for such products.

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. They are ready to innovate and experiment and have set
up specialized Bancassurance units within their fold. Examples of some
new and innovative Bancassurance products are income builder plan,
critical illness cover, return of premium and Takaful products which are
doing well in the market. The traditional products that the

 Building close relations with the customers

Increased competition also makes it difficult for banks to

retain their customers. Banassurance comes as a help in this direction
also. Providing multiple services at one place to the customers means
enhanced customer satisfaction. For example, through bancassurance a
customer gets home loans along with insurance at one single place as a
combined product. Another important advantage that bancassurance
brings about in banks is development of sales culture in their employees.
Also, banking in India is mainly done in the 'brick and mortar' model,
which means that most of the customers still walk into the bank branches.
This enables the bank staff to have a personal contact with their
customers. In a typical Bancassurance model, the consumer will have
access to a wider product mix - a rather comprehensive financial services
package, encompassing banking and insurance products.

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For Insurance Companies

 Stiff Competition

At present there are 15 life insurance companies and 14

general insurance companies in India. Because of the Liberalization of
the economy it became easy for the private insurance companies to enter
into the battle field which resulted in an urgent need to outwit one
another. Even the oldest public insurance companies started facing the
tough competition. Hence in order to compete with each other and to stay
a step ahead there was a need for a new strategy in the form of
Bancassurance. It would also benefit the customers in terms of wide
product diversification.

 High cost of agents

Insurers have been tuning into different modes of distribution

because of the high cost of the agencies services provided by the
insurance companies. These costs became too much of a burden for many

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insurers compared to the returns they generate from the business. Hence
there was a need felt for a Cost-Effective Distribution channel. This gave
rise to Bancassurance as a channel for distribution of the insurance
products.

 Rural Penetration

Insurance industry has not been much successful in rural

penetration of insurance so far. People there are still unaware about
the insurance as a tool to insure their life. However this gap can be
bridged with the help of Bancassurance. The branch network of banks
can help make the rural people aware about insurance and there is also
a wide scope of business for the insurers. In order to fulfill all the
needs bancassurance is needed.

 Multi channel Distribution

Now a days the insurance companies are trying to exploit each

and every way to sell the insurance products. For this they are using
various distribution channels. The insurance is sold through agents,
brokers through subsidiaries etc. 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.

 Targeting Middle income Customers

In previous there was lack of awareness about insurance. The

agents sold insurance policies to a more upscale client base. The
middle income group people got very less attention from the agents.
So through the venture with banks, the insurance companies can
recapture much of the under served market. So in order to utilize the
database of the bank’s middle income customers, there was a need felt
for Bancassurance.

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Chapter 4

 Regulations for Bancassurance in India

1. RBI Norms for banks entering into Insurance

sector

2. IRDA Norms for Insurance companies tying up

with Banks

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RBI Norms for banks

RBI Guidelines for the Banks to enter into Insurance

Business

Following the issuance of Government of India Notification dated

August 3, 2000, specifying ‘Insurance’ as a permissible form of
business that could be undertaken by banks under Section 6(1) (o) of
The Banking Regulation Act, 1949, RBI issued the guidelines on
Insurance business for banks.

1 Any scheduled commercial bank would be permitted to undertake

insurance business as agent of insurance companies on fee basis.
Without any risk participation

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2. 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, subject to safeguards. 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.

The eligibility criteria for joint venture participant are as under:

i. The net worth of the bank should not be less than Rs.500 crore;
ii. The CRAR of the bank should not be less than 10 per cent;
iii. The level of non-performing assets should be reasonable;
iv. The bank should have net profit for the last three consecutive years;
v. The track record of the performance of the subsidiaries, if
any, of the concerned bank should be satisfactory.

3. In cases where a foreign partner contributes 26% of the equity with the
approval of Insurance Regulatory and Development Authority/Foreign
Investment Promotion Board, more than one public sector bank or private
sector bank may be allowed to participate in the equity of the insurance
joint venture. As such participants will also assume insurance risk, only
those banks which satisfy the criteria given in paragraph 2 above, would
be eligible.

4. A subsidiary of a bank or of another bank will not normally be allowed

to join the insurance company on risk participation basis.

5. Banks which are not eligible for ‘joint venture’ participant as above,
can make investments up to 10% of the net worth of the bank or Rs.50
crore, whichever is lower, in the insurance company for providing
infrastructure and services support. Such participation shall be treated as
an investment and should be without any contingent liability for the bank.

The eligibility criteria for these banks will be as under:

i. The CRAR of the bank should not be less than 10%;
ii. The level of NPAs should be reasonable;
iii. The bank should have net profit for the last three consecutive
years.

6. All banks entering into insurance business will be required to obtain

prior approval of the Reserve Bank. 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

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not pose any future threat to the bank in its present or the proposed line of
activity, viz., insurance business. It should be ensured that risks involved
in insurance business do not get transferred to the bank. There should be
‘arms length’ relationship between the bank and the insurance outfit.

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. This will include compliance with Section
6AA of the Insurance Act as amended by the IRDA Act, 1999, for
divestment of equity in excess of 26 per cent of the paid up capital within
a prescribed period of time.

8. Latest audited balance sheet will be considered for reckoning the

eligibility criteria.

IRDA Norms for Insurance Companies

The Insurance regulatory development & Authority has given

certain guidelines for the Bancassurance they are as follows: -
1) Chief Insurance Executive: Each bank that sells insurance must have
a chief Insurance Executive to handle all the insurance matters &
activities.

2) Mandatory Training: All the people involved in selling the insurance

should under-go mandatory training at an institute determined
(authorized) by IRDA & pass the examination conducted by the authority.

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3) Corporate agents: Commercial banks, including co-operative banks

and RRBs may become corporate agents for one insurance company.

4) Banks cannot become insurance brokers.

Issues for regulation: Certain regulatory barriers have slowed the

development of Bancassurance in India down. Which have only recently
been cleared with the passage of the insurance (amendment) Act 2002.
Prior it was clearly an impractical necessity and had held up the
implementation of Bancassurance in the country. As the current
legislation places the following:-

1) Training and examination requirements: upon the corporate

insurance executive within the corporate agency, this barrier has
effectively been removed.

Another regulatory change is published in recent publication of IRDA

regulation relating to the (2) Licensing of Corporate agents

(2) Specified person to satisfy the training & examination: According

to new regulation of IRDA only the specific persons have to satisfy the
training & examination requirement as insurance agent.

Chapter 5

 Benefits of Bancassurance

1. To Banks

2. To Insurance companies

3. To Customers

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To Banks

From the banks point of view:

(A)By selling the insurance product by their own channel the banker
can increase their income.

(B) Banks have face-to-face contract with their customers. They can
directly ask them to take a policy. And the banks need not to go any
where for customers.

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(C) The Bankers have extensive experience in marketing. They can

easily attract customers & non-customers because the customer &
non-customers also bank on banks.

(D) Banks are using different value added services life-E. Banking tele
banking, direct mail & so on they can also use all the above-
mentioned facility for Bankassurance purpose with customers & non-
customers.

(E) Productivity of the employees increases.

(F) By providing customers with both the services under one roof,
they can improve overall customer satisfaction resulting in higher
customer retention levels.

(G) Increase in return on assets by building fee income through the

sale of insurance products.

(H) Can leverage on face-to-face contacts and awareness about the

financial conditions of customers to sell insurance products.

(I) Banks can cross sell insurance products E.g.: Term insurance
products with loans.

To Insurers

From the Insurer Point of view:

(A) The Insurance Company can increase their business through the
banking distribution channels because the banks have so many customers.

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(B) By cutting cost Insurers can serve better to customers in terms lower
premium rate and better risk coverage through product diversification.

(C)Insurers can exploit the banks' wide network of branches for

distribution of products. The penetration of banks' branches into the rural
areas can be utilized to sell products in those areas.

(D)Customer database like customers' financial standing, spending habits,

investment and purchase capability can be used to customize products
and sell accordingly.

(E)Since banks have already established relationship with customers,

conversion ratio of leads to sales is likely to be high. Further service
aspect can also be tackled easily.

(F)The insurance companies can also get access to ATM’s and other
technology being used by the banks.

(G)The selling can be structured properly by selling insurance products

through banks.

(H) The product can be customized as per the needs of the customers.

To Customers

From the customers' point of view:

(A) Product innovation and distribution activities are directed towards
the satisfaction of needs of the customer.

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(B) Bancassurance model assists customers in terms of reduction

price, diversified product quality in time and at their doorstep service
by banks.

(C)Comprehensive financial advisory services under one roof. i.e.,

insurance services along with other financial services such as banking,
mutual funds, personal loans etc.

(D) Easy access for claims, as banks are a regular visiting place for
customers.

(E) Innovative and better product ranges and products designed as per
the needs of customers.

(F)Any new insurance product routed through the bancassurance

Channel would be well received by customers.
.

(G) Customers could also get a share in the cost savings in the form of
reduced premium rate because of economies of scope, besides getting
better financial counseling at single point.

Chapter 6

 Distribution Channels:
1. Career agents

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2. Special advisers
3. Salaried agents
4. Bank employees
5. Corporate agency & Brokerage firm
6. Direct response
7. Internet
8. E- Brokerage
9. Outside lead generating techniques

Distribution Channels

Traditionally, insurance products were promoted and sold

principally through agency systems only. The reliance of insurance
industry was totally on the agents. Moreover with the monopoly of
public sector insurance companies there was very slow growth in the
insurance sector because of lack of competition. The need for innovative
distribution channels was not felt because all the companies relied only

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upon the agents and aggressive marketing of the products was also not
done. But with new developments in consumers’ behaviours, evolution of
technology and deregulation, new distribution channels have been
developed successfully and rapidly in recent years.

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. They are generally considered to be
independent contractors. Consequently an insurance company can
exercise control only over the activities of the agent which are specified
in the contract. Many bancassurers, however avoid this channel, believing
that agents might oversell out of their interest in quantity and not quality.
Such problems with career agents usually arise, not due to the nature of
this channel, but rather due to the use of improperly designed
remuneration and incentive packages.

 Special Advisers:

Special Advisers are highly trained employees usually

belonging to the insurance partner, who distribute insurance products
to the bank's corporate clients. The Clients mostly include affluent
population who require personalised and high quality service. Usually
Special advisors are paid on a salary basis and they receive incentive
compensation based on their sales.

 Salaried Agents:

Salaried Agents are an advantage for the bancassurers because

they are under the control and supervision of bancassurers. These
agents share the mission and objectives of the bancassurers. These are
similar to career agents, 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.

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 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. The platform banker
may be a teller or a personal loan assistant. A restriction on the
effectiveness of bank employees in generating insurance business is
that they have a limited target market, i.e. those customers who
actually visit the branch during the opening hours.

 Corporate Agencies and Brokerage Firms:

There are a number of banks who cooperate with independent

agencies or brokerage firms while some other banks have found
corporate agencies. 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.

 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.
The consumer purchases products directly from the bancassurer by
responding to the company's advertisement, mailing or telephone
offers. This channel can be used for simple packaged products which
can be easily understood by the consumer without explanation.

 Internet:

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Internet banking is already securely established as an effective

and profitable basis for conducting banking operations. Bancassurers can
feel confident that Internet banking will also prove an efficient vehicle for
cross selling of insurance savings and protection products. Functions
requiring user input (check ordering, what-if calculations, credit and
account applications) should be immediately added with links to the
insurer. Such an arrangement can also provide a vehicle for insurance
sales, service and leads.

 E-Brokerage:

Banks can open or acquire an e-Brokerage arm and sell

insurance products from multiple insurers. The changed legislative
climate across the world should help migration of bancassurance in
this direction. The advantage of this medium is scale of operation,
strong brands, easy distribution and excellent synergy with the internet
capabilities.

 Outside Lead Generating Techniques:

One last method for developing bancassurance eyes

involves "outside" lead generating techniques, such as seminars, direct
mail and statement inserts. Great opportunities await bancassurance
partners today and, in most cases, success or failure depends on
precisely how the process is developed and managed inside each
financial institution.

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Chapter 7

 SBI Life Insurance (profile)

 Products offered

 SBI Life Insurance (perspective)

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State bank of India Life Insurance

SBI Life Insurance is a joint venture between the State Bank of

India and Cardif SA of France. SBI Life Insurance is registered with an
authorized capital of Rs 1000 crore and a paid up capital of Rs 500
crores. SBI owns 74% of the total capital and Cardif the remaining 26%.

State Bank of India enjoys the largest banking franchise in India.

Along with its 7 Associate Banks, SBI Group has the unrivalled strength
of over 14,500 branches across the country, arguably the largest in the
world. Cardif is a wholly owned subsidiary of BNP Paribas, which is the
Euro Zone’s leading Bank. BNP Paribas is one of the oldest foreign banks
with a presence in India dating back to 1860. Cardif is ranked 2nd
worldwide in creditor’s insurance offering protection to over 35 million
policyholders and net income in excess of Euro 1 billion. Cardif has also
been a pioneer in the art of selling insurance products through
commercial banks in France and in 35 more countries.

SBI Life Insurance’s mission is to emerge as the leading company

offering a comprehensive range of Life Insurance and pension products at
competitive prices, ensuring high standards of customer service and
world class operating efficiency.SBI Life has a unique multi-distribution
model encompassing Bancassurance, Agency and Group Corporate.

SBI Life extensively leverages the SBI Group as a platform for

cross-selling insurance products along with its numerous banking product
packages such as housing loans and personal loans. SBI’s access to over
100 million accounts across the country provides a vibrant base for
insurance penetration across every region and economic strata in the
country ensuring true financial inclusion.

Agency Channel, comprising of the most productive force of more

than 25,000 Insurance Advisors, offers door to door insurance solutions to
customers.

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Products Offered by SBI

 Individual Products

A. Unit Linked products:

1) SBI Life - Horizon II:

SBI Life-Horizon II is a unique, non participating Unit

Linked Insurance Plan in Indian Insurance Industry, where you need to be
a financial market expert. This plan offers the flexibility of Unit Linked
Plan along with Automatic Asset Allocation which provides relatively
higher returns on your money where as increasing death benefits provide
higher security to your family

2) SBI Life - Unit Plus II:

This is a non participating individual unit linked

product. It provides unmatched flexibility to match the changing
requirements. It provides choice of 5 investments funds in a single policy

3) SBI life- unit plus child plan:

SBI LIFE understand you better and hence have developed

SBI Life - Unit Plus Child Plan to suit you and your needs best. This
Plan is meant for parents in the age group of 18-57 having a child
between the age group of 0-15 years.

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4) SBI Life – Unit Plus Elite:

In this policy the customer can choose the type of cover,

type of fund to be invested in and the term the customer wants to pay
premium for.
B. Pension Products

SBI Life - Horizon II Pension:

A unique Unit Linked Pension Plan that will enable the

customers to build a kitty good enough to enable them to spend a
peaceful and financially sound, retired life. SBI Life - Horizon II
Pension is a safe and hassle free way to get high returns. It comes
with the unique feature of Automatic Asset Allocation by means of
which you truly, don’t need to be an expert to grow your money.

1) SBI Life - Unit Plus II Pension:

SBI Life understands the basic needs for pension plan and
give the customers financial strength to maintain the life style even
after the retirement. This is a unit linked pension plan wherein the
policyholder chooses an investment period from 5 to 52 years for a
vesting age between 50 to 70 years. They can choose to pay either
single premium or pay regular premium for the entire policy term.
Their contributions are invested into 4 fund options as per their
choice.

2) SBI Life - Lifelong Pensions:

It is a pension plan wherein the policyholder gets the
flexibility to meet the post retirement financial needs. It also provides
tax benefits. The policyholder also has the option of withdrawing a
lump sum amount up to particular limit.

3) SBI Life - Immediate Annuity:

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SBI Life - Immediate Annuity Plan is introduced for

Pension Policyholders. This product provides annuity payments
immediately from payment of purchase price. It has been specially
designed to cater to the annuity needs of existing policyholders (SBI
Life - Lifelong Pensions, SBI Life - Horizon II Pension, SBI Life -
Unit Plus II Pension) at the vesting age.

C. Pure Protection Products

1) SBI Life - Swadhan:

This is a Traditional Term Assurance Policy with guaranteed
refund of basic premium .Life cover is provided at no cost. Tax benefit
is also provided. There is also a rebate on high sum assured. There is
also flexible benefit premium paying mode.

2) SBI Life - Shield:

It offers the customers with the life insurance cover at the

lowest cost for a selected term. Tax benefit is also provided. There is
also rebate on modes of premium payment.

3) SBI Life – Shield as a Keyman Insurance Policy:

A Keyman insurance policy is taken to protect the organization

against the reduction in profit resulting from the death of the
Keyman. As per IRDA circular only Pure Term Assurance Products
may be used as a Keyman Insurance. The SBI Life Insurance
provides “SBI Life – Shield” as a Keyman Insurance Policy.

D. Protection cum Savings Products

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1) SBI Life – Sudarshan:

SBI Life - Sudarshan is an Endowment Policy designed to

provide savings and protection to the policyholder and their family.
They can save regularly for the future. Thus at the end of the plan, he
will receive a substantial amount of savings along with the
accumulated bonuses declared. At the same time, his family will be
protected for death risk for the full Sum Assured.

2) SBI Life - Scholar II:

Twin benefit of saving for the child's education and securing a

bright future despite the uncertainties of life. Option to receive the
installments in lump sum at the due date of first installment of
Survival benefit.

E. Money back scheme products

1) SBI Life - Money Back:

It is a Traditional Saving Plan with added advantage of life
cover and guaranteed cash inflow at regular intervals. The plan has a
number of money back options specially suited to the customers
needs. The cover is available at competitive premium rates.

2) SBI Life - Sanjeevan Supreme:

It is a Traditional Saving Plan which offers a life cover for
the term of the customer’s choice at the same time does not burden
him with liability to pay premiums for the entire term and also
provides cash flows at regular intervals.

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F. For Brokers:

1) SBI Life - SARAL ULIP:

It is a simple Unit Linked Non-Participating Insurance

Plan. The sum assured is based on Term and Premium amount. There
is also flexibility to increase or decrease regular premium and it also
provides tax benefits.

 Group Products

A. Group Employee Benefit Products

I. Retirement Solutions:

1) SBI Life - CapAssure Gratuity Scheme:

It is a Non-Participating yearly renewable traditional Group
Gratuity Scheme. Under this scheme, the contributions paid continue to
accumulate on traditional platform of investments and at the end of the
financial year; an investment income earned on your contributions is
credited to your gratuity fund account.

2) SBI Life - CapAssure Superannuation Scheme:

It is a Non-Participating yearly renewable traditional group
superannuation scheme. The object of this scheme is to ensure that the
underlying fund is accumulated in such a manner so that the fund will be
sufficient to purchase an expected amount of annuity to an employee
upon his retirement / to the legal heir in the event of an unfortunate death
during service. The scheme would also entitle the employee for some

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benefit, defined as per the scheme rules, on his resignation, retirement,

permanent total disability whilst in service, death whilst in service.

3) SBI Life - CapAssure Leave Encashment Scheme:

It is a Non-Participating yearly renewable traditional group
leave encashment scheme. Under this scheme, the contributions paid
continue to accumulate on traditional platform of investments and at the
end of the financial year; an investment income earned on your
contributions is credited to your CA-LE fund account.

4) SBI Life - Group Immediate Annuity:

It is a scheme wherein life annuity is payable at a constant rate
through out the life time. Employees can choose the periodicity of the
annuity depending upon the needs.

5) SBI Life - Golden Gratuity:

It is a yearly renewable unit linked group gratuity plan. Along

with managing the gratuity fund a life cover on the employee’s life
protect their family financially in case of unfortunate event.

6) SBI Life - Dhanrashi:

It is a traditional non participating Group Savings Linked

Insurance scheme. This scheme is applicable for both employer-employee
and non-employer employee groups. It has attractive returns on savings
with twin benefits. It also provides protection at low cost with no medical
examination and also hassle free joining process with no entry charges.

7) SBI Life - Swarna Jeevan:

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It is a Group Immediate Annuity Plan for Corporate Clients

(ie.Employer-Employee groups) and other Group Administrators. It
provides Attractive Annuity rates due to group effect. It also gives
customized annuity options to customers. It gives the option to choose the
periodicity of annuity payment.

8) SBI Life - Group Gratuity cum Life Cover Scheme:

It is a Participating yearly renewable traditional Group Gratuity
Scheme. Under this scheme, the contributions paid continue to
accumulate on traditional platform of investments. It also provides tax
benefits.

9) SBI Life - Group Superannuation Scheme:

SBI Life provides two types of Superannuation schemes:
1. Defined Benefit Scheme: It defines the amount of benefit that an
employee receives at retirement.

2. Defined Contribution Scheme: It defines the annual contribution that

the employer will deposit into the scheme for each employee.

10) SBI Life provides SBI Life - Group Leave Encashment

cum Life Cover Scheme:
It is a Non-Participating yearly renewable traditional group leave
encashment scheme. Under this scheme, the contributions paid continue
to accumulate on traditional platform of investments.

11) SBI Life - SWARNA GANGA:

It is a unique product that offers life cover, with an advantage of
accumulating savings at attractive rates, to group of persons who share a
common identity or affinity

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II. Group Protection Plans

1) SBI Life - Sampoorn Suraksha:

SBI Life - Sampoorn Suraksha is a yearly renewable group
term insurance plan which provides life cover at comparatively lower
premium than individual insurance to the groups who are engaged in the
similar kind of activities. It is available for both Formal and Informal
Groups.

2) SBI Life – Super Suraksha:

It is group term assurance non-participating plan. The Product

provides cover at an affordable premium due to the benefits of coverage
of a wide section, and the administered savings achieved. There is a
possibility of profit sharing based on the mortality experience of the
group.

3) SBI Life - Super Suraksha in Lieu of EDLI:

Life cover available to employees irrespective of their
Provident Fund Balance. Lower premium rates are also available. No
medical evidence is required and also there accident death benefit.

4) SBI Life - Credit Guard:

It is a Non Participating Group Term Insurance Plan. It is a
simple and easy solution to cover the cardholders of a bank/other
Financing entity, through a Group Master Policy.

III. Specialized Term Insurance

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1) SBI Life - Shield used as Keyman:

It is a pure term life cover to protect the organization from
adverse financial consequences arising due to death of a key employee.
The aim is to indemnify the company for these losses and to allow for
business continuity.

B. Group Term with ROP:

1) SBI Life - Swadhan (Group):

It is a Non Participating Group Term Insurance Plan with
Return of Premium. It is a simple and easy solution which offers dual
benefits of life cover protection in the event of death and refund of
premium in case of survival up to the end of the cover term.

C. Group Loan Protection Products

1) SBI Life - Dhanaraksha Plus SP:

It provides decreasing term cover at a very low cost. Available for
various types of individual loans for borrowers of a lending institution

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through a Group Master Policy. There is only one time payment of

premium.

2) SBI Life - Dhanaraksha Plus LPPT:

It provides decreasing term cover at a very low cost. Available
for various types of individual loan for borrowers of a lending institution
through a Group Master Policy. There is Limited Premium Payment
Term.

3) SBI Life - Dhanaraksha Plus RP:

It provides decreasing term cover at a very low cost. Available for
various types of individual loan for borrowers of a lending institution
through a Group Master Policy. There are two options for premium
payment i.e. throughout the cover term or 2/3rd of the cover term.

D. Group Savings Protection

1) SBI Life - Nidhi Raksha RP:

It is a unique Plan which will help protect and grow the
customers’ savings. It is offered to deposit holders of the master
policyholder (bank/financial institution). It is a transparent plan, where
the benefit available at any point of time is clearly defined in the
Certificate of Insurance (COI) issued to the insured group member.

E. Group Micro Insurance

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1) SBI Life - Grameen Shakti:

The purpose of this product is to provide life insurance
protection to the weaker sections of the society. It is a Group Micro
insurance product with refund of premiums at maturity.

2) SBI Life - Grameen Super Suraksha:

The purpose of this Product is to provide life cover at low costs
to groups of economically weaker sections of Society. It is a low cost
Group term assurance plan for rural people who can seek life insurance
protection without maturity benefit.

SBI Life Insurance Company (perspective)

SBI Life insurance, a joint venture between State Bank of India,

the largest bank in the country and bancassurance major Cardiff of
France. SBI’s stake in the venture is 74% whereas Cardiff has 26% share.
They have launched many products so far incorporating certain features
that are introduced for the first time in the country. SBI -Life is banking
on the bancassurance model on the strength of the SBI Groups 10000
plus bank branches and its vast customer base. In addition it is also
tapping other. banks corporate agents and the traditional agency route to
penetrate the insurance market SBI Life is planning to introduce more
novel and user friendly products to cater to the requirements of the
consumers in different segments.

SBI has the largest banking network in the county. The bank is
looking for business from every customer segment of the bank rural and
urban segments, upper, middle and lower income segments /groups and
corporate segment. Besides their own channels they are planning to
distribute products through other interested banking channels also. It is
expected that 2/3 rd of the premium income in expected to come by way

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of bancassurance and the rest from the traditional agency channel as well
as ties up with corporate agents (Sundaram Finance). SBI has also
introduced group insurance to some well managed corporate staffs.

Technology is an integral part of this operation. Cardiff

provided the technology required. The project was initiated in April 2004,
and the initial roll-out was completed by August 2004. SBI Life has
implemented an Internet-centric IT system with browser-based front-
office and back-office systems, channel management, policy product
details, online premium calculator and facility for group insurance
customers to view their individual savings status on the Web. The
organization has the facility to pay premiums through credit cards, Net
banking, standing instructions, etc. This is fully integrated with the core
systems through industry standards such as XML, EDI, etc.

Even as it plans to scale up operations shortly, SBI Life

Insurance Company Ltd is looking at tripling its gross premium income
in the new financial year. In 2007-08, SBI Life earned a total premium
income of Rs 5,622 crore, of which income from new policy sales was Rs
4,800 crore. For the current financial year, their target is to achieve a total
premium income of Rs 10,500 crore and a first year premium income of
Rs 8,500 crore”. The SBI Life ranks second in terms of market share
among private life insurers in the country.

SBI Life Insurance Company is the first among the 14 life

insurance companies in the private sector to post a net profit in 2005-06.
There are life insurance players much more aggressive than SBI and they
have still not been able to break the record of SBI. Their success is
largely on the channel strategy and product strategy. The another aspect is
their superior investment performance. They have consistently, over the
last two years, generated 11-12 per cent earnings from the investments.

SBI Life Insurance is uniquely placed as a pioneer to usher

bancassurance into India. The company hopes to extensively utilize the
SBI Group as a platform for cross-selling insurance products along with
its numerous banking product packages such as housing loans, personal

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loans and credit cards. SBI’s access to over 100 million accounts provides
a vibrant base to build insurance selling across every region and
economic strata in the country.

Chapter 8

 Various Trends

 Challenges

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Trends
 Though bancassurance has traditionally targeted the mass market,
but bancassurers have begun to finely segment the market, which
has resulted in tailor-made products for each segment.

 Some bancassurers are also beginning to focus exclusively on

distribution. In some markets, face-to-face contact is preferred,
which tends to favour bancassurance development.

 Nevertheless, banks are starting to embrace direct marketing and

Internet banking as tools to distribute insurance products. New and
emerging channels are becoming increasingly competitive, due to

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the tangible cost benefits embedded in product pricing or through

the appeal of convenience and innovation.

 Bancassurance proper is still evolving in Asia and this is still in

infancy in India and it is too early to assess the exact position.
However, a quick survey revealed that a large number of banks
cutting across public and private and including foreign banks have
made use of the bancassurance channel in one form or the other in
India.

 Banks by and large are resorting to either ‘referral models’ or

‘Corporate agency model’ 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 client’s database for the use of the insurance companies.

 As number of banks in India have begun to act as ‘corporate

agents’ to one or the other insurance company, it is a common sight
that banks canvassing and marketing the insurance products across
the counters.

Challenges

 Increasing sales of non-life products, to the extent those risks are

retained by the banks, require sophisticated products and risk
management. The sale of non-life products should be weighted
against the higher cost of servicing those policies.

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 Bank employees are traditionally low on motivation. Lack of sales

culture itself is bigger roadblock than the lack of sales skills in the
employees. Banks are generally used to only product packaged
selling and hence selling insurance products do not seem to fit
naturally in their system.

 Human Resource Management has experienced some difficulty due

to such alliances in financial industry. Poaching for employees,
increased work-load, additional training, maintaining the
motivation level are some issues that has cropped up quite
occasionally. So, before entering into a bancassurance alliance, just
like any merger, cultural due diligence should be done and human
resource issues should be adequately prioritized.

 Private sector insurance firms are finding ‘change management’ in

the public sector, a major challenge. State-owned banks get a new
chairman, often from another bank, almost every two years,
resulting in the distribution strategy undergoing a complete change.
So because of this there is distinction created between public and
private sector banks.

 The banks also have fear that at some point of time the insurance
partner may end up cross-selling banking products to their
policyholders. If the insurer is selling the products by agents as
well as banks, there is a possibility of conflict if both the banks and
the agent target the same customers.

Chapter 9

 SWOT Analysis

1. Strengths

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2. Weaknesses

3. Opportunities

4. Threats

SWOT Analysis:
Banking and Insurance are very different businesses. Banks
have less risk but the insurance has a greater risk. Even though, banks
and insurance companies in India are yet to exchange their wedding
rings, Bancassurance as a means of distribution of insurance products is
already in force in some form or the other.

Banks are selling Personal Accident and Baggage Insurance

directly to their Credit Card members as a value addition to their
products. Banks can straightaway leverage their existing capabilities in

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terms of database and face-to face contact to market insurance products to

generate some income for themselves, which previously was not thought
of.
The sale of insurance products can earn banks very
significant commissions (particularly for regular premium products). In
addition, one of the major strategic gains from implementing
bancassurance successfully is the development of a sales culture within
the bank. This can be used by the bank to promote traditional banking
products and other financial services as well. Bancassurance enables
banks and insurance companies to complement each other’s strengths as
well.

It is therefore essential to have a SWOT analysis done in the

context of bancassurance experiment in India. A SWOT analysis of
Bancassurance is given below:

Strengths:

 In a country like India of one billion people where sky is the limit
there is a vast untapped potential waiting for life insurance
products. Our other strength lies in a huge pool of skilled
professionals whether it is banks or insurance companies who may
be easily relocated for any bancassurance venture.

 Banks have the credibility established with their constituents

because of a variety of services and schemes provided by them.

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They also enjoy pride of place in the hearts of people because of

their long presence and sustained image.

 Banks also enjoy a wide network of branches, even in the remotest

areas that can facilitate taking up the task on a large and massive
scale, simultaneously.

 Banks are very well aware with the psychology of the customers
because of their interaction with the customers on regular basis.
Because of this the bankers can guess the attitude and diverse
needs of the customers and could change the face of insurance
distribution to personal line insurance.

 People rely more upon LIC and GIC for taking insurance. If the
products of LIC and GIC are provided through bancassurance it
would be an added advantage to the insurance companies.

 With the help of banks trained staff, its brand name and the
confidence and reliability of people on the banks, the selling of
insurance products can be done in a more proper way.

 Other than all these things there is a huge potential for insurance
sector, as the population of India is high and a large part of it has
remained untapped till now. So this can create an added advantage
for both banks and insurers.

Weaknesses:

 In spite of growing emphasis on total branch mechanism and full

computerization of bank branches, the rural and semi-urban banks
have still to see information technology as an enabler. The IT
culture is unfortunately missing completely in all of the future
collaborations. The internet connections are also not properly
provided to the staff.

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 To undertake the distribution of the insurance products, the bank

employees have to undergo certain minimum period of training,
followed by a test and then get themselves licensed. Moreover the
standards of the examination have been raised in the recent past
making it difficult for many examinees to clear the same.

 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. However that may not be the case in regards to a bank
employee.

 There are many differences in the way of thinking and business

approaches of bankers and the managers of insurance companies.
Banks are traditionally “demand-driven” organizations with a
reactive selling philosophy. Insurance organizations are usually
“need-driven” and have an aggressive selling philosophy.

 The visit of a customer to the bank is to have a simple transaction

like deposit or withdrawal. Busy customers will have no time to
have a discussion on a long-term durable purchase like insurance
across the counter. Also, the visits in urban or metro branches are
going to be fewer because of ATM’s and e-banking.

 Another drawback is the inflexibility of the products i.e. it cannot

be tailor made to the requirements of the customer. For a
bancassurance venture to succeed it is extremely essential to have
in-built flexibility so as to make the product attractive to the
customers.

Opportunities:

 There is a vast untapped potential waiting to be mined particularly

for life insurance products. There are more than 900 million
lives waiting to be given a life cover (total number of individual
life policies sold in 1998-99 was just 91.73 million).

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 There are many people in many areas that are still unaware about
the insurance and its various products and are waiting that
somebody should come and give them the information about it.

 In urban and metro areas, where the customers are willing to get
many services like lockers and safe deposit systems and other
products and services from banks, there is a good opportunity to
market many property related general insurance policies like fire
insurance, burglary insurance and medi-claim insurance etc.

 Banks' database is enormous even though the goodwill may not be

the same. This database has to be dissected and various
homogeneous groups are to be churned out in order to position the
Bancassurance products. With a good IT infrastructure, this can
really do wonders.

 Banks in their normal course of functions lend finance in the form

of loans for cars, or for buying a house to clients etc. They can take
advantage of this by cross-selling the insurance products and
combine it as a package.

 Another area that could be of interest to bankers to sell insurance is

exploiting the corporate customers and tying up for insurance of
the employees of corporate clients, which would be an avenue with
easy access. In most cases banks provide salary disbursement and
loan facilities but here they can provide insurance cover as well.

Threats:

 Success of a Bancassurance venture requires change in approach,

thinking and work culture on the part of everybody involved. The
work force at every level are so well entrenched in their classical
way of working that there is a definite threat of resistance to any
change that Bancassurance may set in. Any relocation to a new

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company or subsidiary or change from one work to a different kind

of work will not be easily acceptable by the employees.

 Another possible threat may come from non-response from the

targeted customers. If many joint ventures took place between
banks and insurance companies then it may happen that the
customers may not respond to such ventures as happened in U.S.

 Insurance in India is perceived more as a saving option than

providing risk cover. So this may create an adverse feeling in the
minds of the bankers that such products may lessen the sales of
regular bank saving products. Also selling of investment and good
return products may affect the FD Portfolio of the banks.

 There would be a problem of “Reputational Contagion” i.e. loss of

market confidence towards one in a venture leading to loss of
confidence on the other because of identical brand recognition,
similar management and consolidated financial reporting etc.

 If no strict norms are there for such ventures then many unholy
ventures may take place which may give rise to tough competition
between bancassurers resulting in lower prices and the
Bancassurance venture may never break because of such situations.

 The most common obstacles to success of Bancassurance 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.

Chapter 10

 Indian scenario

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 Global scenario

 Future scope of Bancassurance

 Other tie ups

 Survey Analysis

 Findings

 Recommendations

 Conclusion

 Bibliography

Indian Scenario

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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.

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 25-30% of the premium
income amongst the private players in India.

Bancassurance provides various advantages to banks,

insurers and the customers. For the banks, income from bancassurance is
the only non interest based income. Interest is market driven and
fluctuating and quite narrowing these days. Banks do not get great
margins because of the competition This is why more and more banks are
getting into bancassurance so as to improve their incomes. Increased
competition also makes it difficult for banks to retain their customers.
Banassurance comes as a help in this direction also. Providing multiple
services at one place to the customers means enhanced customer
satisfaction. As for the insurance company the advantage that
bancassurance provides is evident. The insurance company gets improved
geographical reach without additional costs. In India around 67,000
branches are there for PSU banks alone. If all 67,000 branches sell the
insurance products one can see the reach. This is one method of
penetrating the market.

India's rural market has huge potential that is still untapped

by the insurance companies. Setting up their own networks entails such a
huge cost, that no company would be interested in doing so.

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Bancassurance again comes as an answer. It helps the insurance

companies to tap the market at a much lower cost. As for the customer the
competitive nature of the Indian market ensures that the reduction in costs
would result in benefits in terms of lower premium rates being passed on
to him. The penetration level of life insurance in the Indian market is
considerably low at 2.3% of GDP with only 8% of the total population
currently insured.

Thus, bancassurance provide an apparently viable model

for product diversification by banks and a cost-effective distribution
channel for insurers. The success of the partnership between the two
entities depends on the ‘right model’ partnership. Given these changes,
bancassurance and collaboration between banks and insurers has a long
way to go in India. With almost half of the population likely to be in the
'wage earner' bracket by 2010, there is every reason to be optimistic that
bancassurance in India will play a long inning.

Global Scenario

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Bancassurance has grown at different pace and taken different

shapes and forms in different countries depending on the demography,
economic and legislations in that country. During the last two decades,
bancassurance has taken deep roots in various countries, especially in
Europe. Bnacassurance, so far, has been basically European.

Bancassurance has seen tremendous acceptance and growth

across nations. Although it enjoys a penetration rate in excess of 50% in
France, Spain, Italy and Belgium, other countries have opted for more
traditional networks. The Life insurance market in the UK is largely in
the hands of the brokers. With advent of bancassurance, their market
share has increased from 40% in 1992 to 54% in 1999. Sales agents also
play an important role on a market entirely regulated by the Financial
Services & Markets Act (FSMA) which imposes very strict marketing
conditions. In Germany, the market continues to be dominated by general
sales agents, even if their market share has declined from 85% in 1992 to
54% in 1999.

Bancassurance recorded huge growth in Europe but not in

USA and Canada. In the US, there were hurdles till recently banks were
not allowed to do insurance business and vice versa. In several countries
in LatinAmerica, banks have benefited from recent reforms – financial
deregulation, among others – by selling insurance products across the
counter. In China, banks are limited to playing the role of tide agents to
insurance companies, which can still provide a good platform for
bancassurance to develop.

In Hong Kong, when a Swiss bank introduced bancassurance,

the life insurance sales went up by 240%. Japan has to make a remarkable
headway in bancassurance. In the Philippines, banks are permitted to own
100% of the insurance company. Bancassurance is yet to be exploited in
Singapore. There is a huge market potential out there in many countries
and especially in India when compared to the global benchmark. It is a
good news to bancassurers that only about 25% of the global insurable
population is insured, and even among them most are underinsured.

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Future scope for Bancassurance

By now, it has become clear that as economy grows it not only

demands stronger and vibrant financial sector but also necessitates to
provide with more sophisticated and variety of financial and banking
products and services. The outlook for bancassurance remains positive.
While development in individual markets will continue to depend heavily
on each country’s regulatory and business environment, bancassurers
could profit from the tendency of governments to privatize health care
and pension liabilities.

India has already more than 200 million middle class population
coupled with vast banking network with largest depositors base, there is
greater scope for use of bancassurance. In emerging markets, new
entrants have successfully employed bancassurance to compete with
incumbent companies. Given the current relatively low bancassurance
penetration in emerging markets, bancassurance will likely see further
significant development in the coming years.

In India the bancassurance model is still in its nascent stages, but

the tremendous growth and acceptability in the last three years reflects
green pasture in future. The deregulation of the insurance sector in India
has resulted in a phase where innovative distribution channels are being
explored. In this phase, bancassurance has simply outshined other
alternate channels of distribution with a share of almost 25-30% of the
premium income amongst the private players.

To be fruitful, it is vital for bancassurance to ensure that banks

remain fully committed to promoting and distributing insurance products.
This commitment has to come from both senior management in terms of
strategic inputs and the operations staff who would provide the front-end
for these products. In India, the signs of initial success are already there
despite the fact that it is a completely new phenomenon. There is no
doubt that banks are set to become a significant distributor of insurance
related products and services in the years to come.

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Other tie-ups

Life Insurance tie-ups:

Private Sector Companies:

1. Bajaj Allianz Life Insurance Co. Ltd.

2. Birla Sun Life Insurance Co. Ltd.
3. HDFC Standard Life Insurance Co. Ltd.
4. ICICI Prudential Life Insurance Co. Ltd.
5. ING Vysya Life Insurance Co. Pvt. Ltd.
6. SBI Life Insurance Company Limited
7. TATA-AIG Life Insurance Company Ltd.
8. Sahara India Life Insurance Co. Ltd.
9. Aviva Life Insurance Co India Pvt. Ltd.
10. Kotak Mahindra OU Mutual Life Insurance Co. Ltd.
11. Max New York Life Insurance Co. Ltd.
12. MetLife India Insurance Co. Pvt. Ltd.
13. Reliance Life Insurance Co. Ltd.
14. Shriram Life Insurance Co. Ltd.
15. Bharti Axa Life Insurance Co. Ltd.

Public Sector Company:

16. Life Insurance Corporation of India

Non-Life Insurance tie-ups:

Private Sector Companies:

1. Royal Sundaram Allianz Insurance Co. Ltd.

2. TATA-AIG General Insurance Co. Ltd.
3. Reliance General Insurance Co. Ltd.
4. IFFCO-TOKIO General Insurance Co. Ltd.
5. ICICI Lombard General Insurance Co. Ltd.
6. Bajaj Allianz General Insurance Co. Ltd.

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7. HDFC Chubb General Insurance Co. Ltd.

8. Cholamandalam MS General Insurance Co. Ltd.
9. Star Health and Alhed Insurance Co. Ltd.

Public Sector Companies:

10. The New India Assurance Co. Ltd.
11. National Insurance Co. Ltd.
12. United India Insurance Co. Ltd.
13. The Oriental Insurance Co. Ltd.
14. Export Credit Guarantee Corporation Ltd.
15. Agriculture Insurance Company Ltd.

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Survey analysis (questionnaire)

A survey was conducted of about 50 people who did regular banking

transactions and also had an insurance policy. These included several
housewives, businessmen, professionals, students, etc. The following
analysis was done on the basis of the survey conducted:

 Are you aware of Bancassurance?

No 20%

Yes
Yes 80% No

Interpretation: - Among those who surveyed, 80% of respondents were

aware that their bank provided bancaasurance.They knew with which
Insurance Company their bank has tie up with; also they were aware
about various policies provided by their banks. However, 20% of the
respondents were amused with the term bancassurance and didn’t know
anything about it and the services provided by their banks.

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 Have You Taken An Insurance Policy From Your Bank?

Yes
34%
No

No Yes
66%

Interpretation: Among the people who were surveyed, there were only
34% people who had taken insurance policy from their respective banks.
Remaining 66% respondents didn’t opt to take a policy from their banks.

 The Kind Of Insurance Policy Taken From The Bank:-

70 63%

60

50 42%

40

30 23%
18%
20

10
0

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Deposit Based Loan Based Life Insurance Others

Interpretation: Maximum number of insurance taken was related to

loan. It was either car insurance or a home insurance. Out of the people
surveyed 63% said that they have taken a loan based insurance. There
were 23% who have taken insurance which are deposit based because it is
a part of the deposit scheme. Only 18% have taken life insurance cover
from the bank and 42% belong to others category.

 Reasons For Taking An Insurance Policy:-

90
80% 28% 65% 40%
80
70

60
50
40
30
20
10
0
Security Savings Brand Image of Bank Image of
Bank Insurance

Interpretation: There was a mixed response from the customers. 80%

said that they took the insurance policy because of security benefits. 65%
said that since, they trusted their bank, they took the policy. There were
4o% who said that the brand image of the company also mattered. Only
28% said that savings was a reason that encouraged them to buy
insurance policy.

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 On Your Choice Which Mode Of Insurance Distribution

Channel Would You Prefer To Buy The Policy From?

Insurance
companies Banks
20% 23%

Brokers
7%

Agents
50%

Interpretation: 50% people preferred agents because they provide

personalized services. 20% took insurance from companies because of
their trust on the company. 23% said they would buy insurance from
banks because of the brand name and their trust on banks. Only 7% said
that they would buy insurance from brokers.

 Which Bank Do You Feel Would Excel In Bancaasurance? Rate

Them Accordingly

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100
90%
90
80
70%
70
60
50 38%
40
30
20
10
0

Public Sector Private Sector Foreign Banks

Banks 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. 70% votes were given to foreign banks.
Because foreign banks have proper management and aggressive selling
strategies. The public sector banks were given the least votes because of
their lazy approach to work.

 Do You Think Bancassurance Has A Good Future?

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No,5%

Yes
No

Yes,95%

Interpretation: 95% people said that they believe that Bancassurance

has a very bright future because there is an immense potential for the
insurance industry in India. But 7% believe that because of the emergence
of the new technology such as ATM’s, Internet banking etc the banks will
soon go virtual so there is not much scope for it.

Findings

 Although the concept is simple enough in theory, but in practice it

has been found to be far from straightforward.

 Almost many people have a fair idea about Bancassurance and that
their banks sell various insurance products. But still few people
don’t know about Bancassurance as a concept.

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 It has been also found out that the banks have various opportunities
to cross sell insurance products. The insurance companies also
have the opportunity to take advantage of the bank’s network and
other avenues.

 It is also seen that customers have a lot of trust on the banks, and
because of that trust the customers will take the insurance products
from banks.

 As the brand name of the banks is important so is the brand image

of the insurance companies. So the banks and the insurance
companies must tie-up with the right partners. This will help them
to create a better image in the minds of the customers.

 It has also clear from the study that the private sector and the
foreign banks have better future in Bancassurance. But the public
sector banks are also trying to give them a tough competition e.g.
SBI Life Insurance Co.

 The insurance business can go a long way because there is a large

population who is still unaware about insurance. So the insurance
companies have a huge potential market in the years to come.

 The banks fail to provide personalized services as are provided by

the agents. So banks will have to improve in that area. They should
provide after sales services to the customers.

 Banks now-a-days are trying to provide each and every service to

its customers. So by providing insurance, banks can add one more
service to their list.

Recommendations

 The Insurance companies need to design products specifically for

distributing through banks. Trying to sell traditional products may
not work so effectively.

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 The employees of the banks who are selling insurance products

must be given proper training so that they can answer to any
queries of the customers and can provide them products according
to their needs.

 Banks should also provide after sales services and they should be
more aggressive in selling the insurance products.

 Banks should also do the settlement of claims which will increase

the trust and reliability of the customers on the banks.

 In India, since the majority of the banking sector is in public sector

which has been widely responsible for the lethargic attitude and
poor quality of customer service, it needs to rebuild the blemished
image. Else, the bancassurance would be difficult to succeed in
these banks.

 A formal and standard agreement between these banks and the

insurance companies should be taken up and drafted by a national
regulatory body. These agreements must have necessary clauses of
revenue sharing. In case of possible conflicts, the bank
management and the management of the insurance company
should be able to resolve conflicts arising in future.

 For bancassurance to succeed, products and processes will need to

be tailored to bank markets, rather than adjusted to insurer’s
specifications.

 Banks and Insurance companies should apply all the skills and
potential in this area and take advantage of the same and they
should improve the products from time to time according to the
needs of the customers.

Conclusion

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The life Insurance Industry in India has been progressing at a

rapid growth since opening up of the sector. The size of country, a
diverse set of people combined with problems of connectivity in rural
areas, makes insurance selling in India a very difficult task. Life
Insurance Companies require good distribution strength and tremendous
man power to reach out such a huge customer base.

The concept of Bancassurance in India is still in its nascent stage,

but the tremendous growth and the potential reflects a very bright future
for bancassurance in India. With the coming up of various products and
services tailored as per the customers needs there is every reason to be
optimistic that bancassurance in India will play a long inning.

But the proper implementation of bancassurance is still facing so

many hurdles because of poor manpower management, lack of call
centers, no personal contact with customers, inadequate incentives to
agents and unfullfilment of other essential requirements.

I have experienced a lot during the preparation of the project. I had

just a simple idea about Bancassurance. But after a detailed research in
this topic I have found how important bancassurance can be for bankers,
insurers as well as the customers. I am contented that all my objectives
have been met to its fullest.

I have also experienced that though Bancassurance is not being

utilized to its fullest but it surely has a bright future ahead. India is at the
threshold of a significant change in the way insurance is perceived in the
country. Bancassurance will definitely play a defining role as an
alternative distribution channel and will change the way insurance is sold
in India.

The bridge has been reached and many are beginning to walk those
cautious steps across it. Bancassurance in India has just taken a flying
start. It has a long way to go ……….. after all The SKY IS THE LIMIT!

Bibliography

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 Insurance watch.

 Business world.

 Business today.

 Theories and Practices in Insurance.

Webliography

 www.insuremagic.com

 www.google.com

 www.sbilife.com

 www.india infoline.com

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