BANKASSURANCE

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 BANKASSURANCE. Bankassurance 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 others 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 BANKASSURANCE (an emerging concept in India). 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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Introduction To Bankassurance Bank Assurance are also named as Bancassurance BANCASSURANCE as term itself tells us what does it means. Its a combination of the term Bank and Insurance. It means that insurance have started selling there product through banks. Its a new concept to Indian market but it is very widely used in western and developed countries. It is profitable both to Banks and Insurance companies and has a very bright future to be the most develop and efficient means of distribution of Insurance product in very near future. Insurance company can sell both life and non-life policies through banks. The share of premium collected by banks is increasing in a decent manner from the time it was introduce to the Indian market. In India Bankassurance in guide by Insurance Regulatory and Development Authority Act (IRDA), 1999 and Reserve Bank of India. All banks and insurance company have to meet particular requirement to get into Bankassurance business. It is predicted by experts that in future 90% of share of premium will come from Bankassurance business only. Currently there are more and more banking and Insurance Company and venturing into Bancassurance business for better business prospect in future. The banking business is also generating more profit by more premium collected by them and they also receive commission like normal insurance agent which increase there profits and better reputation for the banks as there service base also increase and are able to provide more service to customers and even more customer are attracted toward bank. It is even profitable for Insurance Company as they receive more and more sales and higher customer base for the company. And they have to directly deal with an organization which reduce there pressure to deal with each customer face to face. In all Bankassurance has proved to be boom in whole Banking and Insurance arena.
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Bankassurance is defined as Selling Insurance products through banks. The word is a combination of two words Bank and assurance signifying that both banking and insurance products and service are provided by one common corporate entity or by banking company with collaboration with any particular Insurance company. In concrete terms bancassurance, which is also known as Allfinanz - describes a package of financial services that can fulfill both banking and insurance needs at the same time. The usage of the word picked up as banking and insurance companies merged together and banks sought to provide insurance, in the market which has been liberalized recently. But it is a controversial issue as many experts feels that this ides gives banking sector too great a control over financial market in that country. Therefore it has also been restricted in many countries too. But, still which countries have permitted Bankassurance in their market has seen a tremendous boom in that sector. The share of premium collected by them has increased in constant and decent manner. This success coincided with a favorable taxation for life insurance products, as well as with the consumers' growing needs, in terms of middle and long term savings, which is due to an inadequacy of the pension schemes in India. The links between bank and insurance takes place through various ways (distribution agreements, joint ventures, creation of a company new company) which gives rise to a complete upheaval concerning marketing strategies and the setting up of insurance products' distribution. More and better insurance starts coming in market. This stream of market has just been opened very recently for the Indian market and there is lot of development left to be done by the government and regulatory authority. But this has proven to be a boom for the Insurance and Banking companies together and both the different sector of the industry has shown better result and improvement in their own field due coming of the whole new concept of BANKASSURANCE. Bankassurance in its simplest form is the distribution of insurance products through a banks distribution channels. It is
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the provision of insurance and banking products and service through a common distribution channel or through a common base.Banks, with their geographical spreading penetration in terms of customers reach of all segments, have emerged as viable source for the distribution of insurance products. The concept of bankassurance was evolved in Europe. Europe leads the world in Bankassurance market penetration of banks assurance in new life business in Europe which ranges between 30% in United Kingdom to nearly 70% in France. However, hardly 20% of all United States banks were selling insurance against 70% to 90% in many Western European countries. In Spain, Belgium, Germany and France more than 50% of all new life premiums is generated by banks assurance. In Asia, Singapore, Taiwan and Hong Kong have surged ahead in Bancassurance then that with India and China taking tentative step forward towards it. In Middle East, only Saudi Arabia has made some feeble attempts that even failed to really take off or make any change in the system.The motives behind bankassurance also vary. For Banks, it is n means of product diversification and source of additional fee income. Insurance companies see bancassurance as a tool for increasing their market penetration and premium turnover. The customer sees bancassurance as a bonanza in terms of reduced price, high quality products and delivery at the doorsteps. With the liberalization of the insurance sector and competition tougher than ever before, companies are increasingly trying to come out with better innovations to stay that one-step ahead.Progress has definitely been made as can be seen by the number of advanced products flooding the market today - products with attractive premiums, unitized products, unit-linked products and innovative riders. But a hitherto untapped field is the one involving the distribution of these insurance products.Currently, insurance agents are still the main vehicles through which insurance products are sold. But in a huge country like India, one can never be too sure about the levels of penetration of a product. It therefore makes sense to look at well-balanced, alternative channels of distribution. Nationalized insurers are already well established and have an extensive reach and presence. New players may find it expensive
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and time consuming to bring up a distribution network to such standards. Yet, if they want to make the most of India's large population base and reach out to a worthwhile number of customers, making use of other distribution avenues becomes a must. Alternate channels will help to bring down the costs of distribution and thus benefit the customers History 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. 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 provide 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 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.

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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 services add about 7% to the countrys 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.

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What is BANKASSURANCE?

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.. 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 Bankassurance, tries to exploit synergies between both the insurance companies and banks. It is a service that can fulfill both banking and insurance needs at the same time. Bancassurance as a concept first began in India when the insurance industry opened up to private participation in December 1999 Bankassurance 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.Bankassurance if taken in right spirit and implemented properly can be win-win situation for the all the participants' viz., banks, insurers and the customer.

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Models of Bankassurance 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 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
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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. 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 bankassurance 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 FDIs participation up to 49 per cent. II. Product based classification

(a) Stand-alone Insurance Products In this case bankassurance 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 banks customer, however, the

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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 banks 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 banks 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 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.

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Utilities of Bankassurance 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 Bankassurance route are endless. A typical commercial bank has the potential of maximizing fee income from Bankassurance up to 50% of their total fee income from all sources combined. Fee Income from Bankassurance also reduces the overall customer acquisition cost from the banks 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 Bankassurance
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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 Bankassurance 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 Bankassurance. 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. Bankassurance comes as a help in this direction also. Providing multiple services at one place to the customers means enhanced customer satisfaction. For example, through bankassurance 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 Bankassurance. 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 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 Bankassurance 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 Bankassurance. The branch network of banks can help make the rural people aware about
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insurance and there is also a wide scope of business for the insurers. In order to fulfill all the needs bankassurance 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 Indias large population base and reach out to a worthwhile number of customers there was a need for Bankassurance 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 banks middle income customers, there was a need felt for Bankassurance.

Regulation of Bancassurance in India

RBI Norms for banks RBI Guidelines for the Banks to enter into Insurance Business Following the issuance of Government of India Notification dated
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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 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
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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 nonperforming assets of the applicant bank so as to ensure that nonperforming assets do 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.
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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. 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 Bankassurance 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 Bankassurance 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.

IRDA CURRENT REGULATIONS The Insurance Regulatory and Development Authority (IRDA) released a report earlier this week that may extend insurance options offered at banks. The committee has been researching the new bankassurance model since 2009.

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The proposal would allow banks to sell products of multiple insurers in the form of what is called open architecture. What this would mean to you is more options and therefore, ideally, better insurance. In other words, banks would be allowed to offer two options for insurance ranging from life insurance, non-life insurance and health insurance, among other options out of India. Presently, the way the structure is setup is one bank can sell products of any one insurer in the life and non-life categories. Benefits of Bankassurance Benefits 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. (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 abovementioned 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.
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(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. Benefits 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. (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 ATMs and other technology being used by the banks.

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(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.

Benefits To Customers

From the customers' point of view: (A) Product innovation and distribution activities are directed towards the satisfaction of needs of the customer. (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 bankassurance 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.

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THE WIN WIN CONDITION FOR BANKS AND INSURANCE COMPANIES.

Banks

Insurance

Customer retention

Revenues and channel of diversification

Satisfaction of more financial need under same roof. Revenue diversification More Profitable resources utilization. Establish sales orientated culture. Enrich work environment.

Quality customer access.

Establish a low cost acquisition channel. Creation of Brand Image. Quicker Geographical reach. Leverage service synergies with Bank.

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Distribution Channels Traditionally, insurance products were promoted and sold principally through agency systems only. The reliance of insurance industry was totally on the agents. 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 bankassurers, 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.

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Salaried Agents:

Salaried Agents are an advantage for the bankassurers because they are under the control and supervision of bankassurers. 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.

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:

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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 bankassurer 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:

Internet banking is already securely established as an effective and profitable basis for conducting banking operations. Bankassurers 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 bankassurance 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 bankassurance eyes involves "outside" lead generating techniques, such as seminars, direct mail and statement inserts. Great opportunities await
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bankassurance partners today and, in most cases, success or failure depends on precisely how the process is developed and managed inside each financial institution. SbI and ICICI

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 Zones leading Bank SBI Life Insurances 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 multidistribution 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. SBIs 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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ICICI Pudencial life Insurance Company

ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, one of the foremost financial services companies of India and Prudential plc, one of the leading international financial services group headquartered in the United Kingdom. ICICI Prudential was amongst the first private sector life insurance companies to begin operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA). ICICI Prudential Life's capital stands at Rs. 4,780 crores (as of September 30, 2010) with ICICI Bank and Prudential plc holding 74% and 26% stake respectively. For the period April 1, 2010 to September 30, 2010, the company garnered Rs 7,267 crores of total premiums and has underwritten over 10 million policies since inception. The company has a network of over 1,500 offices and over 1,60,000 advisors, as on September 30, 2010. The company has assets held over Rs. 65,000 crores as on September 30, 2010. For the past nine years, ICICI Prudential Life has maintained a wide range of Life Insurance products that meet the needs of the Indian customer at every step in life. ICICI Prudential Life recently completed 10 years on the Indian Insurance scape on 12th December 2010. Now here we compare the products offered by Sbi life insurance company and ICICI Prudencial life insurance company which are as:

Products Offered A. Pension Products

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SBI LIFE INSURANCE: 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, dont 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: 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. ICICI PRUDENCIAL LIFE INSURANCE
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BANKASSURANCE

1)LifeStage Pension: A regular premium unit linked pension plan that provides you with a unique lifecycle-based strategy that continuously re-distributes your money across various asset classes based on your age and risk profile 2) Premier Life Pension : It is a unit-linked pension policy with a limited premium paying option for preferred customers. urn of premium & single premium.

B. Protection Products SBI LIFE INSURANCE:

This is a Traditional Term Assurance Policy with guaranteed refund of basic premium .Life cover is provided at no cost. Tax benefits 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
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BANKASSURANCE

SBI Life Insurance provides SBI Life Shield as a Keyman Insurance Policy. ICICI PRUDENCIAL LIFE INSURANCE: Protection 1)ICICI Pru iprotect: It is a term insurance plan which you can buy online at your convenience in just 3 easy steps. 2) Save 'n' Protect: Its a perfect plan to collect funds as savings and be protected by the insurance policy. 3) Cashbak: Its a policy with a combination of three benefits periodic liquidity, protection & savings. 4) Home Assure: It is a policy where you can cover your home loan which is a term assurance plan. 5) Life Guard: It is a cover which is available at a low cost. This plan comes with 2 options level term assurance with ret C)Health products SBI LIFE INSURANCE : 1).SBI Life Group Criti9 : This plan provides protection against 9 critical illnesses where Sum Assured is paid in lump sum on diagnosis of any one of covered critical illnesses. 2) SBI Life Hospital Cash : It is a comprehensive plan that covers not only hospitalization expenses but also other incidental costs

ICICI PUDENCIAL LIFE INSURANCE:

BANKASSURANCE

1) ICICI Pru MediAssure: A Health Insurance Plan with AAA guarantee for the family Assured cover till age 75 years Assured coverage for accepted pre-existing illnesses after 2 years Assured price for 3 years Moreover, this policy covers all your hospitalisation needs with the flexibility to choose your location and quality of treatment. 2) ICICI Pru Hospital Care II: It is a family floater plan covering your spouse and children. Trends
Though bancassurance has traditionally targeted the mass

market, but bankassurers have begun to finely segment the market, which has resulted in tailor-made products for each segment.
Some bankassurers are also beginning to focus exclusively on

distribution. In some markets, face-to-face contact is preferred, which tends to favour bankassurance 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 the tangible cost benefits embedded in product pricing or through the appeal of convenience and innovation.
Bankassurance 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 bankassurance 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.
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BANKASSURANCE

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. 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. 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
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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. 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, Bankassurance 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 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 bankassurance 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. Bankassurance enables banks and insurance companies to complement each others 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:

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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. 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 bankassurance it would be an added advantage to the insurance companies. With the help of banks trained staff, its brand name and the confidence and reliability of people on the banks, the selling of insurance products can be done in a more proper way. Other than all these things there is a huge potential for insurance sector, as the population of India is high and a large part of it has remained untapped till now. So this can create an added advantage for both banks and insurers. Weaknesses:

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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. 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 ATMs and ebanking. 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.
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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). 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.
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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 Bankassurance 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 Bankassurance may set in. Any relocation to a new company or subsidiary or change from one work to a different kind of work will not be easily acceptable by the employees. 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.
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If no strict norms are there for such ventures then many unholy

ventures may take place which may give rise to tough competition between bancassurers resulting in lower prices and the Bankassurance venture may never break because of such situations.
The most common obstacles to success of Bankassurance 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. Article on Cause-Effect on Insurance Industry after recession Insurance industry follows closely the fortune of the financial sector and is directly impacted by the movements at the macro-economic level. Economic growth spurs insurance activities and a recession creates manifold problems for the insurance industry. Current recession actually started in late 2007 when subprime crisis reared its ugly head though manifestations became visible only in 2008. Several significant casualties have been reported, e.g. AIG, Lehman Brothers, Washington Mutual, Merrill lynch, Citigroup, Freddie Mac, Northern Rock, Bradford & Bingley and many others have either failed or are in bad shape due to severe losses. This situation has led to liquidity crunch worldwide and cash flow has dried up. Consumer confidence is shaken and the demand for products and services are at abysmally low level.Unlike banks that were dumbstruck by the end of third quarter in 2008 due to the unfolding saga of financial crisis, insurers have shown rather remarkable resilience and in all probability would be declaring year-end results on a positive note. First nine months of performance may see them through despite massive investment losses in the last quarter of 2008. Banks are not releasing installments to firms even on limits which were agreed prior to this crisis. This has impacted the engineering class of business in the insurance sector. Inquiries for CAR (Contractors All Risks), EAR (Erection All Risks), Machinery Breakdown and Equipment Insurance have almost dried up in the last
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few months. Construction, infrastructure projects by governments and energy projects by private as well as governments have either been shelved or being delayed and insurance industry will have to live without large premiums from the project insurance for some time. Continued recession shall have impact on property class of business too. Cost-cutting in the corporate sector may lead to reduced expenditure on insurance. Falling market prices of property shall further bring down the premium volume on property insurance. Business Interruption or Loss of Profit premiums also shall go down due to reduced profit forecasts for most corporate. Life insurance sector is likely to see even bigger erosion in volumes and profits. Employee benefit schemes, Workmens Compensation, Medical Insurance, Group Life and Personal Accident Insurance, etc. are likely to take maximum hit. With the investment portfolio almost gone, most unit-linked policies, Pension Funds and other investment backed insurance products shall show negative NAV (Net Asset Value) and consumer confidence shall further nosedive. Policy holders are already requesting cancellation of their policies in order to preserve cash in this moment of crisis. Retail insurance sector has similar problems. Low consumer confidence and stringent lending norms for retail customers by banks have led to reduced demand for products and services. Automobile companies are struggling to keep afloat due to negative sales growth. Declining international trade and consequent reduction in export and imports have resulted in inflated inventories and consequent redundancy of work force has increased job loss claims. Reduced international trade has also impacted marine cargo and marine hull insurance businesses and premium incomes have dropped substantially.There are other issues too to ponder. Insurance industry is likely to see multiple bad moral hazard cases as depressed market conditions may lead to payment defaults and corporate frauds. Such situation stimulates claims on fire losses, business interruption losses and losses arising out of Directors and Officers liability litigation. Madoff and Satyam Computers are two recent examples to prove the point.

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. Bankassurance 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. Bankassurance provides various advantages to banks, insurers and the customers. For the banks, income from bankassurance 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 bankassurance so as to improve their incomes. Increased competition also makes it difficult for banks to retain their customers. Bankassurance 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. Thus, bankassurance 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, bankassurance and collaboration between banks and insurers has a
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long way to go in India. With almost half of the population likely to be in the 'wage earner' bracket by 2011, there is every reason to be optimistic that bankassurance in India will play a long inning. Bankassurance picking up, but rather slowly in India Insurers are increasingly opting for banks as distribution channels to sell their insurance policies, a concept which is termed as Bankassurance in financial jargon.Simply put, bankassurance is the process through which insurance products are sold to customers at their local banks. With a banking network of 80,000 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 size of the country, a diverse set of people combined with problems of connectivity in rural areas, makes insurance selling in India a very difficult proposition. Life insurance companies require immense distribution strength and tremendous manpower to reach out to such a huge customer base. Naturally bankassurance is a very convenient and costeffective way for insurers to expand their reach and sale across the length and breadth of the country. Many insurers are willing to sell equity to banks which would give them wider reach. Recently, MetLife sold 30% to Punjab National Bank. Earlier, Max New York Life had sold 4% stake to Axis Bank. More recently Aviva Life, in which Dabur has a 74% stake, sold 30% equity to Syndicate Bank. With this deal Aviva is hoping to ride on the wide reach and mass base of the state-run bank to penetrate far-flung areas of the country and multiply its sales. Currently, there are around 17 banks with shareholding in insurance companies. Although banks have entered into pacts to sell policies of insurance companies, insurers have not been able to fully utilise the potential of banks. Of the 80,000 bank branches in the country, just 7,000 are selling insurance. According to a report by the Insurance Regulatory and Development Authority (Irda), premium collected through bancassurance amounted to Rs 21,947 crore in 2009-10, which is 7.31% of the total premium income of life and non-life insurance sectors.Compare the figures with those of HSBC Life in
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China, which confirmed that its bancassurance sales made up 80% of its total 2010 revenues. Bankassurance is a well accepted fact by the insurance industry in China, but in India it has evolved rather slowly. 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 bankassurance partnership can run into problems during implementation. The other problem is often the conflict of interest that arises when banks try to sell insurance policies. In India insurance is often seen as a savings rather than as a risk management tool and this pits it directly against savings and term deposits. Obviously the priority for banks then would be to sell their deposit schemes before insurance policies.Some banks however have dealt with this problem and grown well by including bancassurance as an essential part of their portfolio. HDFC Standard Life, the life insurance wing of HDFC Bank for example gets 50% of its annual revenues from bancassurance. Similarly SBI grew its revenues in FY2010-11 by a significant 33%, which was attributed by the banks senior management to its bankassurance foray.Insurance companies have to realize that bankassurance is the way to sell insurance in the future as it is the most cost-effective and effective way to reach the customer, while banks will have to take a cue from successful peers in bankassurance to realize that it will only contribute to their growth and not stymie it.

Future scope for Bankassurance

BANKASSURANCE

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 countrys regulatory and business environment, bankassurers 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 bankassurance. In emerging markets, new entrants have successfully employed bankassurance to compete with incumbent companies. Given the current relatively low bankassurance penetration in emerging markets, bankcassurance 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, bankassurance 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.

Other tie-ups
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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. 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:
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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. CASE STUDIES LIC EYES 5% SALES THROUGH BANKASSURANCE{2 SEP 2011} Life Insurance Corporation of India (LIC) is looking at a huge jump in premium collected through bankassurance, amid increasing competition from private players.Life Insurance Corporation collected Rs 1,281 crore in premium through bancassurance, which involves using bank branches for selling policies and collecting uremia, FY11. This accounted for a little over 0.60% of the total premium collection of Rs 2,03,358 crore.The corporation sold 7 lakh new policies through this channel during 2010-11. "Target for the current year is that we want to get 5% of our total premium for bancassurance. And 5% of LIC's premium is huge, you have to realise that," LIC Executive Director (Corporate Communications) Vipin Anand said.However, he said leveraging the channel was not easy. "Definitely the scope is much more. Only thing is - for banks which do not own an insurance company, insurance is not very high on priorities. That is the reality, we have to understand that," Anand said."If the insurance company is owned by a bank, there is an entirely different kind of stake...Their mainstay [of distribution] is going to be the bank," he added.LIC has tie-ups with various banks, including Corporation Bank, United Bank of India, Bank of Maharashtra and Uco Bank.Anand further said that LIC's 1.337 million agents are its mainstay and it should not be compared with the private sector insurers which count banks as promoters.

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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 Bankassurance?

N 2% o 0
Ys e N o

Y s8 % e 0

Interpretation: - Among those who surveyed, 80% of respondents were aware that their bank provided bankassurance.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 bankassurance and
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didnt know anything about it and the services provided by their banks.

Have You Taken An Insurance Policy From Your Bank?

Yes 34%

No
No 66%

Yes

Interpretation: Among the people who were surveyed, there were only 34% people who had taken insurance policy from their respective banks. Remaining 66% respondents didnt opt to take a policy from their banks.

The Kind Of Insurance Policy Taken From The Bank:-

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70 60 50 40 30 23% 20 10 0

63%

42%

18%

Deposit Based

Loan Based

Life Insurance

Others

Interpretation: Maximum number of insurance taken was related to loan. 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:-

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90 80 70 60 50 40 30 20 10 0

80%

28%

65%

40%

Security Bank Image of Insurance

Savings

Brand Image of Bank

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. On Your Choice Which Mode Of Insurance Distribution Channel Would You Prefer To Buy The Policy From?

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Ins u rance com pan ies 20%

Ban ks 23%

Brokers 7% Agen ts 5 0%

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
100 90 80 70 60 50 40 30 20 10 0

90% 70%

38%

Public Sector Banks

Private Sector Banks

Foreign Banks

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Interpretation: 90% people said that private sector banks would excel in this because of their aggressive selling policies and they provide quality services to the customers. 70% votes were given to foreign banks. Because foreign banks have proper management and aggressive selling strategies. The public sector banks were given the least votes because of their lazy approach to work. Do You Think Bankassurance Has A Good Future?

No,5%

Yes No

Yes,95%

Interpretation: 95% people said that they believe that Bankassurance 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 ATMs, Internet banking etc the banks will soon go virtual so there is not much scope for it.

Findings

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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 dont know about Bancassurance as a concept. It has been also found out that the banks have various opportunities to cross sell insurance products. The insurance companies also have the opportunity to take advantage of the banks 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.
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Recommendations The Insurance companies need to design products specifically for distributing through banks. Trying to sell traditional products may not work so effectively. 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 bankassurance to succeed, products and processes will

need to be tailored to bank markets, rather than adjusted to insurers specifications.

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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 Bankassurance 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 bankassurance in India will play a long inning. But the proper implementation of bankassurance 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 Bankassurance. 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 Bankassurance 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. Bankassurance 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. Bankassurance in India has just taken a flying start. It has a long way to go .. after all The SKY IS THE LIMIT!

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Bibliography

Insurance watch. Business world. Business today. Theories and Practices in Insurance.

Webliography

www.insuremagic.com

www.google.com

www.sbilife.com

www.india infoline.com

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