CHAPTER- I

INTRODUCTION
A. Executive summary
B. Title Introduction
C. Project Introduction

Bancassurance

Page 1

INTRODUCTION:
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 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 BANCASSURANCE (an emerging concept in

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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.
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.

TITLE INTRODUCTION:
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.
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.

PROJECT INTRODUCTION:
The bank insurance model (BIM), also sometimes known as
bancassurance, is the partnership or relationship between a bank and
an insurance company whereby the insurance company uses the bank
sales channel in order to sell insurance products, an arrangement in
which a bank and an insurance company form a partnership so that
the insurance company can sell its products to the bank's client base.
BIM allows the insurance company to maintain smaller direct
sales teams as their products are sold through the bank to bank
customers by bank staff and employees as well. Bank staff and tellers,
rather than an insurance salesperson, become the point of sale and
point of contact for the

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customer. Bank staff are advised and supported by the insurance
company through product information, marketing campaigns and
sales training.
The bank and the insurance company share the commission.
Insurance policies are processed and administered by the insurance
company.
This partnership arrangement can be profitable for both companies.
Banks can earn additional revenue by selling the insurance products,
while insurance companies are able to expand their customer base
without having to expand their sales forces or pay commissions to
insurance agents or brokers. Bancassurance, the sale of insurance and
pensions products through a bank, has proved to be an effective
distribution channel in a number of countries in Europe, Latin
America, and Asia
BIM differs from classic or Traditional Insurance Model (TIM)
in those TIM insurance companies tends to have larger insurance
sales teams and generally work with brokers and third party agents.
An additional approach, the hybrid insurance model (HIM), is a mix
between BIM and TIM. HIM insurance companies may have a sales
force, may use brokers and agents and may have a partnership with a
bank. BIM is extremely popular in European countries such as Spain,
France and Austria. The use of the term picked up as banks and
insurance companies merged and banks sought to provide insurance,
especially in markets that have been liberalized recently. It is a
controversial idea, and many feel it gives banks too great a control
over the financial industry or creates too much competition with
existing insurers.
In some countries, bank insurance is still largely prohibited, but
it was recently legalized in countries such as the when the Glass
Steagall Act was repealed after the passage of the Gramm-LeachBliley Act. But revenues have been modest and flat in recent years,
and most insurance sales in U.S. banks are for mortgage insurance,
life insurance or property insurance related to loans. But China
recently allowed banks to buy insurers and vice versa, stimulating the
bancassurance product, and some major global insurers in China have

7
seen the bancassurance product greatly expand sales to individuals
across several product lines.
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.
There was a time in the past when insurance policies were meant for a
small part of public who were financially strong. Today the scenario
has completely changed wherein insurance policies reach every
person in almost every corner of our nation. This change in the
financial horizon was ushered in with the birth of bancassurance in
India. Banks which were meant for deposits, loans and transactions
are allowed to provide insurance policies to people and this feature of
bank is called bancassurance.

CHAPTER II
COMPANY PROFILE
A. Bank Introduction
B. Bank Products
C. Company Highlights

COMPANY PROFILE:
A. Bank Introduction:
SBI Life Insurance is a joint venture between State Bank of
India and BNP Paribas Cardif. SBI owns 74% of the total capital and
BNP Paribas Cardif the remaining 26%. SBI Life Insurance has an
authorized capital of 2,000 crores and a paid up capital of ` 1,000
crores.
State Bank of India is the country's largest commercial bank in terms
of profits, assets, deposits, branches and employees. Established over
200 years ago, State Bank Group has a presence in 33 countries and
extensive network of more than 19,000 branches and 31,000 plus
ATMs in India. The only Indian Bank to feature in the Fortune 500
list, SBI has 5 Associate Banks and 7 Subsidiaries. With millions of
customers across the country, SBI offers complete range of banking
products and services with cutting edge technology and innovative
banking model.
BNP Paribas Cardif is the life, property & casualty insurance
arm of BNP Paribas, one of the strongest banks in the world. BNP
Paribas Group, having presence in more than 80 countries ranks
highly in Retail Banking, Investment Solutions and Corporate &
Investment Banking. BNP Paribas Cardif is one of the world leaders
in creditor insurance and its life and non-life insurance units have
received an AA rating from Standard & Poor's. SBI Life's mission is
to emerge as the leading company offering a comprehensive range of

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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 vibrant Bancassurance, Retail Agency, Institutional
Alliances and Corporate Solutions distribution channels. SBI Life
extensively leverages the State Bank Group relationship 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, thus ensuring true financial inclusion.
Agency Channel, comprising of the most productive force of over
94,000 Insurance Advisors, offers door to door insurance solutions to
customers.

OVERVIEW:

O P Bhatt, chairman, State Bank of India, formally inaugurated the

intranet facility, which the promoters say would help them implement
an "integrated bancassurance" approach and reduce turnaround time
to meet customer requirements.
"Bancassurance Online is a significant step towards integrating
insurance with banking and it will provide my staff's information as
well as education on life insurance, "said Bhatt.
The intranet would assist in imparting e-training on life insurance
products and provide information to the sales staff at branches with
details of insurance services, policy servicing and claim settlement
processes.

PRODUCTS OFFERED BY SBI:

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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 1857 having a child between the age group of 0-15 years.
4) SBI Life Unit Plus Elite:

12
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, 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.

13
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
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

14
Life Insurance provides SBI Life Shield as a Keyman
Insurance Policy.

D. Protection cum Savings Products

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.

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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 customers 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.
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.

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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 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.

17

4) SBI Life - Group Immediate Annuity:

It is a scheme wherein life annuity is payable at a constant
rate throughout 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 employees 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 employeremployee 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:

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.

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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.

2) 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.

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III. Specialized Term Insurance

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

21
institution 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.

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E. Group Micro Insurance

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.

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COMPANY HIGHLIGHTS:
The Company, SBI Life, has delivered another successful year of
operational excellence, financial performance, growth & recognitions.
Balancing profitability and growth, despite worsening global financial
environment & slowdown in Indian insurance industry, SBI Life has
posted a record profit of 622 crores reflecting a growth of 11.94% as
compared with previous year. The Company collected a total Gross
Written Premium (GWP) of ` 10,450 crores, comprised of ` 5,183
crores New Business Premium and ` 5,267 crores Renewal Premium.
The Company has registered a strong growth of 19.40% in its First
Year Premium and a growth of 13.30% in its Individual new business
measured on Annualized Premium Equivalent (APE) basis. The
performance in Renewal Premium
collection led to improvement in the Companys 25th month
persistency by 319 basis points and 37th month persistency by 1144
basis points. The company retained a private market share of 16.85%
and a total market share of 4.84% for the financial year 2012-13.
Reflecting excellence in its operational efficiency, SBI Life continued
to maintain one of the lowest
Operating Expense (excl. service tax on ULIP charges) to GWP Ratio
at 9.73%, amongst private sector life insurance companies. The Asset
under Management (AUM) of the Company rose by 11.46% to `
51,912
crores as on March 31, 2013 as against ` 46,576 crores as on March
31, 2012. The Company is committed to maintain a stricter solvency
margin level than the regulatory requirement. The Solvency ratio of
the
Company stands at 2.15 as on March 31, 2013 as against the
regulatory requirement of 1.50, indicating the strong & stable

24
financial health of the Company. All key distribution channels
namely, Bancassurance, Agency and Corporate Solutions
demonstrated profitable business growth during the year. The Agency
Channel provided a significant thrust to the
overall business, contributing 41.57% of total premium as a result of
superior productivity levels of Insurance Advisors. Bancassurance
contributed 34.19% of the total premium and Corporate Solutions
contributed 21.09% of total premium.
During the financial year 2012-13, the company grew at a steady pace
and strengthened its base by adding 44 new branches, 385 employees
and 7,527 Insurance Advisors & CIFs. Testifying Companys
approach towards life insurance inclusion, 23% of total lives covered
by the Company are from the rural segment and 68,714 lives covered
are from the underprivileged social sector, leading to the Company
exceeding the minimum Rural & Social regulatory requirements.

CHAPTER III
RESEARCH METHODOLOGY

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RESEARCH METHODOLOGY:
Research as a term stand for Systematic investigation towards
increase sum of knowledge. Research methodologies are the
methods involve in gathering meaningful data.

Data collection:
The data has been collected from various sources and can be
categorized into two main fields mainly
1. Primary data
2. Secondary data

26
Primary data:
Primary data is the collection of data which is gathered from precise
sources and are accurately maintained.

Secondary data:
It is the type of data which is dependent on primary data and other
sources.
Secondary data was collected by
1. Published data on internet.

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CHAPTER-IV

A. Aims and Objectives

B. Hypothesis

AIMS AND OBJECTIVES:

28

To study the concept and utilities of Bancassurance .

To analyse and study the procedure of Bancassurance .

To study the Regulations for Bancassurance in India.

To study the norms of insurance companies regulated

byI)
RBI
II)
IRDA

To analyze the various distribution channels for

Bancassurance and their benefits to them.

29
HYPOTHESIS:

HO1: The new emerging trend of bancassurance is beneficial for

the banking and insurance sector in India.
HO2: The various distribution channels used for the purpose of
bancassurance are beneficial for their scope and development
in India.

HO3: SBI is playing the major role in banking and insurance sector
of India.

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CHAPTER V
STUDY OF BANCASSURANCE:
A. Origin of Bancassurance.
B. Classification of Bancassurance.
C. Needs of Bancassurance in India.
D. Regulations for Bancassurance in india.
E. Benefits Of Banassurance.
F. Scope of Bancassurance.
G. Distribution Channels for Bancassurance.

31

A. 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.

B. Classification of Bancassurance:
Models of Bancassurance:

32
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, and 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

33
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 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 FDIs 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

34
menu of products offered to the banks 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 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 everywhere as the banks get commission,
the insurance companies get databases of the customers and the
customers get the benefits.

C. Need for bancassurance in India:-

35

Researches and present day statistics speak about the need of a

well equipped financial structure for a country that helps it to grow
economically. The financial resources in the hands of people should
be channelized in effective manner so as to increase the returns from
the basic financial structure of nation and also the quality of living of
people. Insurance policies are instruments/products that play major
role in upholding the financial structure of developed countries.
Though the teething phase of insurance, one may say is just past, a
desirable foothold is yet to be found. With growth in number of
middle class families in the country, RBI recognized the need of an
effective method to make insurance policies reach people of all
economic classes in every corner of the nation. Implementing
bancassurance in India is one such development that took place
towards the cause. The need and subsequent development of
bancassurance in India began for the following reasons:

To improve the channels through which insurance policies are

sold/marketed so as to make them reach the hands of common man

To widen the area of working of banking sector having a

network that is spread widely in every part of the nation

To improve the services of insurance by creating a competitive

atmosphere among private insurance companies in the market

36

D. Regulations under RBI and IRDA:-

The Reserve Bank of India and the insurance development and

regulatory authority have a set of guidelines for companies that
couple to form bancassurance. Based on the equity a bank should
hold in joint venture, the highest allowable value of equity, the type of
banks and insurance companies that can couple together and the
operation of bancassurance are all the factors that are regulated by
RBI and IRDA.
The IRDA has very recently drafted guidelines to promote open
architecture in bancassurance. Currently a bank has a tie-up with only
one life insurer and one non-life insurer. But in the new model the
banks necessarily have to have multiple tie-ups. The country is
divided into zones and every bank has to choose multiple insurers
within the zones. With this the customer will have a wider range of
insurance products offered by different insurers. It will also lead to a
deeper penetration in the selling of insurance products.
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.

37

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

38
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 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

39

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.
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:-

40
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.

E. Benefits of Bancassurance:-

41

The question that arises why should customer go for bancassurance

and how bancassurance is likely to benefit the bank Customers:
Benefit to Customers :
They can obtain a basket of products under one roof
They get risk coverage at bank itself
Availability of advices on financial planning
Opportunity to make better informed choice in financial matters like
selection of insurance cover
Ease of renewals through of executing standing instructions
Benefits to Insurance Company :
Captures premium of bank financed assets
Greater geographical reach through banks network at relatively
lower cost
Access to banks customers
Gaining credibility in customer mindset by associating with bank
Ease of renewals and lower lapse incidence
Potential for cross selling
Potential for up-selling including depth and width
Selling personal lines of insurance products to banks, depositors and
other customers
Introducing co-branded products like Fire Policy for Home Loans
Attracting walk-in customers in bank network
Benefits to Banks :
Bank gets more non interest income
Bank gets New customers and better penetration in existing
customer base
Increased association with the bank

42
Branch achieves profitability target
Bank Insurance Model allows the insurance company to maintain
smaller direct sales teams as their products are sold through the bank
to bank customers by bank staff. Bank staff and tellers, rather than an
insurance salesperson, become the point of sale/point of contact for
the customer. Bank staff are advised and supported by the insurance
company through product information, marketing campaigns and
sales training. The concept combines banking and investment
management services with the sophisticated use of insurance as a
financial planning structure to achieve fiscal advantages and security
for investors and their families

Some Bancassurance companies:

SBI life insurance Company

LIC is tied up with Vijaya bank, Oriental bank of commerce,

Corporation bank

ICICI Lombard

Barclays MetLife India

Axis bank MetLife India

43

F. Scope Of Bancassurance.
The insurance business in emerging markets, such as Asia and Latin
America, has experienced strong growth over the past decade, driven
by a favourable economic and regulatory environment, and the
outlook for the next decade also looks promising, Swiss Re, a global
reinsurer, said in a report.
The report said that bancassurance, a concept that was virtually nonexistent prior to 2000, has gained importance in many countries,
especially for the distribution of life insurance. Its rapid growth has
been driven mainly by regulatory reforms in key emerging markets,
including China and India.
In India, bancassurance premiums accounted for 22 per cent of new
business premiums for private sector players in 2010. With a growing
middle class and over 70,000 bank branches, bancassurance in India
has plenty of room to expand, the report noted.
Switzerland-based Swiss Re receives part of a larger potential
obligation in exchange for some of the money the original insurer
received to accept the obligation.
Over the past decade, insurance premiums in emerging markets
expanded at 11 per cent a year, far outstripping the 1.3 per cent
growth rate seen in industrialised economies, the global reinsurance
giant said in the report.

44

The growth trend of insurance premium in emerging markets is

expected to continue over the next decade as well because global
insurers are looking at emerging markets for profitable growth
beyond the more saturated and mature markets in industrialised
countries.
Due to their size, industrialised countries are in absolute terms still
the main insurance premium contributors, but emerging markets are
catching up fast, said Oliver Futterknecht, co-author of the Swiss Re
report.
In 2010, industrialised economies contributed $120 billion in
additional premiums in nominal terms, but emerging markets
followed closely with $109 billion.
Asia and Latin America contributed the most to emerging market
premium growth in the past 10 years. The growth in the region was
driven by a solid economic environment, improvements in insurance
regulation, product innovation and a leveraging of multiple
distribution channels.
Interestingly, growth rates in emerging markets may be stellar, but,
this growth has not been very profitable because nearly half of 174
life insurers surveyed failed to report consistent profits between 2006
and 2009, and only 20 per cent registered profit margins above 10 per
cent, Swiss Re said.
The scenario is similar for non-life markets too, with 49 per cent of
all companies surveyed recording negative underwriting margins, it
added.
Low profitability may indicate an overly aggressive focus by insurers
on top line growth rather than profitable growth.

45

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 countrys 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.

46
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.

47
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 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:

48
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.

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.

49

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:

50

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

51
bancassurance partners today and, in most cases, success or failure
depends on precisely how the process is developed and managed
inside each financial institution.

CHAPTER VI:
Data Analysis and Interpretation

52

DATA ANALYSIS ANDMINTERPRETAION:

53

Insurance Industry statistics:

New business premium fallen to 107,011 crores during the current
financial year 2012-13 from 114,233 crores of the previous financial
year, showing a de-growth of 6.32%; Private sector has registered a
de-growth of 5.97%;
Private sector retained a market share of 28.75% of total new business
premium which is slightly better than the previous year; Regular
premium (non-single) business of private players has declined
marginally by 3.5%, whereas the same is declined by 17% for the
industry as a whole; Single premium business of private sector has
declined sharply by 11.6%, whereas the same has grown by 6.63% for
the industry.
Life Insurance Penetration and Density:
Insurance penetration and insurance density are the two important
indicators, which provide the level of development of insurance
Sector in an economy.
The insurance penetration in India, which surged consistently till
2009-10, has slipped since 2010-11 on account of slowdown in life

54
insurance premium as compared to the growth rate of the Indian
economy.
Life insurance penetration had consistently gone up from 2.15 per
cent in 2001 to 4.60 per cent in 2009, before slipping to 4.40 per cent
in 2010 and further slipping to 3.40 per cent in 2011.
India has reported consistent increase in insurance density every year
since the sector wasopened up for private competition in the year
2000. However, for the first time in 2011, there was a fall in insurance
density. The life insurance density in India has gone up from USD 9.1
in 2001 to USD 49.0 in 2011 though it reached the peak of USD 55.7
in 2010.
The overall life insurance industry growth has kept pace with the
GDP growth in the country.
The countrys economic growth had consistently gone up from 4.3%
in 2001 to 8.6% in 2010, before slipping to 6.2% to 2012 and further
slipping to below 5% in FY 2012-13.
Following is the chart of life insurance penetration and density in
India:

Note:
1. Insurance density is measured as ratio of premium (in US Dollar)
to total population.
2. Insurance penetration is measured as ratio of premium (in US
Dollar) to GDP (in US Dollar).

55
3. Source: IRDA Annual Report, 2011-12.
Share of life insurance in financial saving of household sector:
The share of life insurance in financial savings of household sector
has increased over last several years from 15% in FY 2006-07to 23%
in FY 2011-12. The insurance industry, by offering a comprehensive
range of long-term savings and protection products, can channelize a
larger share of household savings and enhance the levels of financial
protection in the Indian economy.
Current Industry Scenario (FY 2013):
For the last couple of years the life insurance went through a
transition phase that has changed the dynamics and approach of
theinsurance players. It is facing a number of challenges involving the
macro-economic environment, consumer sentiment and
rapidregulatory changes. As a consequence of these changes and the
market conditions, the industry players re-configured their business
models, product mix and distribution structures. The share of Unit
Linked Insurance Plans (ULIPs) declined in the overall product mix.
Also, with regards to the distribution channel mix, share from
Bancassurance channel gained prominence due to its cost
effectiveness.
During the year, the industry strengthened its focus towards
enhancing professional delivery of products and services to
customers.
In financial year 2012-13, the industry has seen a de-growth of 6.3%
in new business premium income. Insurers focusing on
customers to remain invested for longer term resulted in improved
persistency ratio for the industry. With low insurance
penetration as compared to the large Indian population base, there is
tremendous scope for the life insurers to capitalize on.
Summary of New Business Premium & Market Share (FY 2013)

56

New business premium fallen from ` 114,233 crores for the previous
year to ` 107,011 crores for the current financial year
2012-13, showing a de-growth of 6.3%.
Private sector has also shown a de-growth of 6%.
Private sector claims 28.8% of total new business premium market
share in financial year 2012-13.
BUSINESS REVIEW & OUTLOOK
Financial Performance
The Company has completed another successful year of
operations. The Company has earned a Gross Written Premium
(GWP)
of ` 10,450 crores on the back of consistent growth in
Individual business during the financial year (FY) 2012-13.
The Company
continued meeting its stakeholders expectations achieving
profitable growth year on year.
The summary of Companys financial performance for FY
2012 - 13 is as under:

57

The Company has registered a strong and consistent performance

during FY 2012-13. The key financial parameters of the Company are
as follows:
Maintained its No. 1 position amongst private life insurers on total
New Business Premium (NBP) basis, achieving highest NBP of `
5,183 crores with a market share of 16.9% amongst private players.
Registered a strong growth of 19.4% in NBP (Regular Business)
standing at ` 2,618 crores in FY 2013 as against ` 2,193 crores
of FY 2012

58
Demonstrated a robust growth of 13.3% in its Individual New
Business APE Portfolio
Collected a Renewal Premium of ` 5,267 crores during the FY 2013
from various distribution channels
Continued to show a steady growth both in business and earnings.
The Net Profit of the Company grew by 12% and stands at 622 crores
during the year ended March 31, 2013 as against ` 556 crores of the
preceding year
Continued to maintain one of the lowest Operating Expense
(excluding service tax on ULIP charges) to Gross Written Premium
ratio (the OPEX Ratio) at 9.7%, amongst private sector life insurance
companies
Based on the Company's overwhelming performance during the FY
2013 in this subdued growth phase of the industry, your Company has
registered a strong growth of 11% in its Assets Under Management
(AUM) to ` 51,912 crores as on March 31, 2013 as against ` 46,576
crores as on March 31, 2012, while the benchmark index (Nifty 50)
has posted a return
of 7.3% during the year
The Solvency ratio of the Company stands at 2.15 as on March 31,
2013 as against the Regulatory requirement of 1.50 indicating the
strong & stable financial health of the Company
Based on the robust financial performance of the Company year on
year, there has been no external capital infusion during
the last five financial years
In view of Company's performance, profitability, cash flows and
financial position, an interim dividend was declared during the FY
2012-13 at 5% of equity share capital amounting to ` 58.11 crores
(including dividend distribution tax)

59

CHAPTER VII
A. Findings
B. Limitations

60

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 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.

61
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.
Limitations of bancassurance:

Data management of an individual customers identity and

contact details may result in the insurance company utilizing the
details to market their products, thus compromising on data security.

There is a possibility of conflict of interest between the other

products of bank and insurance policies (like money back policy).
This could confuse the customer regarding where he has to invest.

62

Better approach and services provided by banks to customer is

a hope rather than a fact. This is because many banks in India are
known for their bad customer service and this fact turns worse when
they are responsible to sell insurance products.

Work nature to market insurance products require submissive

attitude, which is a point that has to be worked on by many banks in
India.

Lack of sales culture itself is bigger roadblock than the

lack of sales skills in the employees.

Private sector insurance firms are finding change

management in the public sector, a major challenge. Stateowned banks get a new chairman, often from another bank,
almost every two years, resulting in the distribution strategy
undergoing a complete change.
Limitations of the project:
Reliability of the sources could be Limitation for the project.
Bank does not provide full information
Research can cover the vast area.

CHAPTER VIII
A. Conclusion
B. Suggestions

63
C. Webliography
D. Bibliography

CONCLUSION:

64

The success of bancassurance greatly hinges on banks ensuring

excellent customers relationship therefore banks need to strive
towards that direction. As pointed out byLow(2004), the changing
mindset is cascading through the banking sector in India and this
would be a right time for banks to resorting to bancassurance,
especially in the context of proactive policy environment of
regulatory authorities and the Government. The fact that the banking
operations in India, unlike in other developed countries, are still
branch oriented and manually operated vis--vis highly mechanized
and automated banking channels, viz., internet banking, ATMs, etc.
are all the more conducive for flourishing of bancassurance.
Regulators could explore the Possibility of allowing banks
having tie-up arrangements with more than one insurance company,
giving wider choice for the customers.
In addition to acting as distributors, banks have recognised the
potential of bancassurance in India and will take equity stakes in
insurance companies, in the long run. This is somewhat similar a
trend observed in the United Kingdom and elsewhere where banks
started off as distributors of insurance but then moved on to the fully
owned insurance subsidiaries. Going by the present pace,
bancassurance would turn out to be a norm rather than an exception in
future in India. Supervisory concerns as pointed out earlier could best
be tackled by way of closer and systematized coordination between
the respective supervisory authorities. There needs to be a clear cut
identification of activities between banking and insurance at the
institutions level as also at the level of regulators.
Adequate training coupled with sufficient incentive system
could avert the banksstaff resistance if any. In sum, bancassurance
strategy would be a win-win situation for all the parties involved the customer, the insurance companies and the banks. The most
immediate advantage for customers is that, in insurance business the
question of trust plays a greater role, especially due to the inbuilt
requirement of a long term relationship between the insurer and the
insured. In India, for decades, customers were used to them on

65
opolistic attitude of public sector insurance companies, despite there
were many drawbacks in their dealing, they enjoyed customer
confidence, this trend continues even now mainly due to their
government ownership. The customers to move over to private
insurance companies that are collaborated with foreign companies
which are less known to the Indian public would take little more time.
The void between the less known newer private insurance companies
and the prospective insured could be comfortably filled by the banks
because of their well established and long cherished relationship.
Under these circumstances, any new insurance products routed
through the bancassurance channel would be well received by the
customers. Above all, in the emerging scenario, customers prefer to
have a consolidation and delivery of all financial services at a single
window in the form of financial supermarket, irrespective of
whether financial or banking transactions, because such availability
of wide range of financial/ banking services and products relieves the
customers from the painstaking efforts of scouting for a separate
dealer for each service/ product. Even internationally, the trend is
towards the one-stop-shop.
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. Even in the case of
developed countries the financial literacy and financial counseling has
been increasingly stressed in recent years, these become essential
especially when decision involves long term investments.
In India, recently Reddy (2006) has been emphasizing on the
importance and necessity for financial counseling and financial
literature. In that context too the bankers are better placed in
extending such counseling or financial advises to the customer
because of their well established long cherished relationship.

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!

66

Suggestions:
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

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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 insurers 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.

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BIBLIOGRAPHY:

Insurance Management S.C. Sahoo & S.C. Das

Data published on internet.

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