An empirical study of Bancassuarance: Prospects & Challenges

for selling Insurance Products through Banks in India.

*G.S. Popli
** Rao, D.N.
1. Background:

The rapid growth and globalization of financial markets is one of the most significant
developments in the world economy. This development has far reaching
consequences, not only for financial markets per se but the growth and direction of
world business. Financial deregulation and innovations have changed the whole
structure and functioning of financial markets. The financial services environment
has been undergoing major changes. The Financial Companies are searching for
highly efficient distribution systems due to increasing competitive pressures and the
difficulty in sustaining product differentiation. These have led to price competition,
emphasis on reduction of marketing costs, product differentiation and the extensive
utilization of new channels. Not surprisingly, distribution has become a critical
element in marketing strategy for selling of financial products. It has been gaining a
more prominent role among marketing variables and has become a major source of
competitive advantage.

With the opening up of Insurance sector in India, a new opportunity has emerged for
Insurance sector and Banking Sector. This has provided an opportunity to both the
sectors for enhanced sales and source of additional income. It is the rise of a new
dawn that has brought with it new opportunities. From innumerable insurers to
affordable and quality cover for the consumers, from increase in distribution
channels to incorporating information technology measures, from net selling to
bringing about increased transparency – its all there.

* currently working as Deputy Chief Manager (Financial Analyst). with Oriental Bank
of Commerce, New Delhi.

** currently working as Director, Centre for Management Education, All India

Management Association, New Delhi.

Electronic copy available at: http://ssrn.com/abstract=1339471

The Insurance agent is no more the only distribution channel today for insurance
products. Increase in distribution channels has among others also seen the concept
of Bancassurance taking roots in India and it is emerging to be a viable solution to
mass selling of insurance products.

The Financial Sector Reforms introduced after the recommendations of First

1
Narasimham Committee, the contemporary financial landscape has been reshaped .

Banks, in particular, stride into several new areas and offer innovative products viz
Merchant Banking, Lease and Term finance, Capital / Equity Market related activities,
Hire-Purchase, Real Estate finance and so on. Thus, present day banks have become
far more diversified than ever before. Therefore, their entering into insurance
business is only a natural corollary and is fully justified too as insurance is another
financial product required by the bank customers.

Bancassurance simply defined, is distribution of insurance products through network

of Banks. Many Banking Institutions and Insurance Companies have found
Bancassurance to be attractive and profitable which complements to the core
business. Bancassurance encompasses terms such as ‘Allfinanz (in German). This
concept gained importance in the growing global insurance industry and its search
for new channels of distribution. Banks with their geographical spread and
penetration in terms of customer reach of all segments have emerged as viable
source for the distribution of insurance products.

The Insurance Regulatory and Development Authority (the regulatory authority for
2
insurance business in India) , refers Bancassurance as “banks acting as Corporate

Agents for insurers to distribute insurance products”. Literature on bancassurance

does not differentiate between the selling of Life Insurance Products or Non-Life
Insurance products through Bancassurance channel. Accordingly, in this paper
“Bancassurance” is defined to mean banks dealing in insurance products of both life
and non-life type in any forms.

1 http:/rbidocs.rbi.org.in/rdocs/Publications/PDFs/80595.pdf
2 www.irda.org

Electronic copy available at: http://ssrn.com/abstract=1339471

The concept of bancasurance has been very successful in Europe, especially France
and Portugal. These countries are stated to be most successful in bancassurance
wherein as much as 70% of the insurance products were sold through the Banking
Channel alone followed by Spain where more than 60% of the insurance products
were being sold through the Banks (Appendix 1). In countries such as Belgium and
Italy, though the bancassurance concept has been in prevalence for some years but
seems to be picking up only since the late 1990s. As opposed to the above, in the
UK and the Netherlands the concept of Bancassurance slated to be relatively less
popular although banks sell the insurance products.

1.1 Benefits of Bancassurance

Bancassurance is beneficial to all the concerned viz. Banking Sector, Insurance

Sector and the customers. It provides an opportunity to banks for product
diversification and a source of additional income. The enormous trust that the banks
command in the minds of the public is an important reason why Insurance
Companies seek to enter into wide ranging banking partnerships. The banks in turn,
find that the customers appreciate the provision of integrated financial services at
the bank branches, which in turn builds better customer loyalty and retention levels.

Insurance Companies see bancasurance 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 product, professional guidance and delivery at
doorsteps. The Insurance Companies and Banks together find that their collaboration
at providing a package of financial services not only benefits customers but also
maximizes their profits.
1.1.1 Benefits to the Banks

 Use of existing infrastructure.

 Proximity to customers & large database.
 Additional channel for generation of fee based revenue. As the profits
are declining in the traditional banking, banks need additional non-
interest income for their survival. It has been estimated that there is
a hidden goldmine of Rs. 1,80,000 crores of Annual Premium Income.
 Optimising manpower utilization.

 Strengthening customer relationship.

Electronic copy available at: http://ssrn.com/abstract=1339471

 1.1.2 Benefits to the Insurance Company

 Ready-made distribution network – 68,000 bank branches.

 Access through a vast customer base, whole financial profile is known
– 30 Crores retail banking customers.
 Economy in distribution cost.
 Banks pivotal medium to lift level of insurance penetration in the
country.

1.1.3 Benefits to the Customers

 Economy in cost of insurance.

 High skilled and trained executives to bring them the benefits of
insurance.
 Integrated financial services under one roof.
 Banks can meet important set of consumer needs.

2. Literature Review

Chen et al (2008) in their empirical study based on panel analysis of a sample of 28

firms from developed and developing countries found that the size of the national
banking industry, the level of financial deregulation within a country, and the
national inflation rate play significant role as determinants of bancassurance.

The study of Rajkumari (2007) to identify the customers' attitude towards purchase
of insurance products and also their knowledge on the bancassurance formats
available through banks concluded that there is a low level of awareness about
bancassurance among bank customers and suggested to improve insurance
penetration levels.

Barua (2006) studied the challenges in distribution; growth potential; the benefits to
insurance companies; the benefits to banks and customers; the critical success
factors; the manner in which companies select banks etc.

According to Rayala et al (2004), the success of Bancassurance depends on how the

social and cultural needs of the target population are understood.

4
Artikis et al (2008) had identified profit potential, product expansion, wider customer
base, lower distribution costs, stronger brand names, improved products and
services, automated and simplified financial transactions impact the bank-insurance
interface.

The literature on Bancasurance indicates the success story of this new channel in
most of the European Countries. This is the favourable legal system in these western
countries, which have been supported by the availability of strong banking
infrastructure. The concept of all financial services under one roof and relationship
banking have contributed a lot in building up of bancassurance. Above all, the
reputations of the banks were also stated to have played a key role in popularizing
the concept of bancassurance in Europe. The tax incentives provided under fiscal
measures also played an important role in some countries viz. France. Black et al
(2002) examined Customer’s choice of financial services distribution channels. They
showed that consumer confidence, lifestyle factors, motivations and emotional
responses influence the customer’s choice, while product, channel and organizational
factors such as image and reputation are also significant.

There are several studies that have related cross-selling opportunities to the
development of common acquisition patterns of financial products and/or to the
identification of specific customer segments as best prospects for successful cross-
selling (SCOR, 2003). The research studies have shown, customer’s demographic
data such as income, education, life cycle, financial sophistication, age and gender
can predict the probability of acquisition of financial products and services and may
effect customer’s likelihood of purchasing another product from the same financial
service provider.

McGoldrick and Greenland (1992) tried to identify customer’s most likely provider
source (bank/building society/insurance company/employer) in relation to four major
financial services (mortgages, life policies, personal pensions and loans). They
assessed the viability/suitability of each channel for each product from the customer
prospective. According to their findings, the traditional suppliers are deemed to be
the most likely option in many cases.

5
Morrison and Roberts (1998) highlighted the significance of product channel
interactions and the need to consider the degree of congruence between a product
and a channel when evaluating the factors influencing the decision to adopt or use a
channel for a purchase.

Lee and Marlowe (2003) tried to provide a better understanding of how consumers
choose their financial institution. Although consumer’s decision-making criteria may
vary dependent on their experiences, socio-economic and demographic
characteristics. They found that the most important criterion that consumers use in
selecting a financial institution is convenience in terms of location of office and/or
other convenience features. Retail fees are the second most frequently reported
decision-making criterion, followed by the range of services offered and the existing
personal relationships.

Boyed et al (1994) also explored customer behavior in relation to the selection of a

financial service provider. They examined customer’s scores on selection criteria,
such as reputation and friendliness by taking into account customer’s demographic
characteristics, e.g. size of household, household income, age and gender of
household head. The results revealed that factors such as reputation, interest
charged on loans and interest paid for saving accounts were critical, while less
important were friendliness of employees and the modern facilities.

3. Indian Insurance Sector

The emergence and spread of Bancassurance has been one of the most significant
developments in the Retail Financial Services Sector in India. The Indian Insurance
Industry is growing very fast. Banks and Insurance Companies see Bancassurance
as the answer to the Indian retail financial industry’s future income. The banks in
India have a client base of close to 120 Million and therefore are an ideal case for
carrying bancassurance forward. A unique aspect will be predominance of rural bank
branches in sales processes and the closeness of the bank staff with customers in
general in the rural pockets. In order to capitalize on this new opportunity, several
banks have established Joint-Venture Companies with leading insurance majors of
the world.

The Indian Insurance Industry upto April 1, 2000, comprised mainly two state
insurers, Life Insurance Corporation of India to conduct Life Insurance business and

6
General Insurance Corporation of India to transact the non-life insurance business.
A single company cannot take up both life and non-life insurance activities in a
competitive way as per law.

3.1 Impact of opening up of Insurance Sector

As anticipated and envisaged, the opening up of the sector has had several positives
for the Indian Insurance Sector. IRDA was established in the year 2000 as an
exclusive Regulatory Authority for the insurance sector through the enactment of
IRDA Act, 1999. A number of amendments were brought in various insurance
related statutes viz. Insurance Act 1938, LIC Act 1956 and General Insurance
Business Nationalisation Act 1972. The progress in the overall developments in the
insurance sector was swift and more prominent after the establishment of IRDA.

The four public sector non-life insurance companies were de-linked from being
subsidiary of the General Insurance Company of India. The upshot of these
developments was the breakage of monopoly by public sector in the insurance sector
paving the way for the entry of private entities into the insurance market and the era
of competition set in with availability of wide range of insurance products in the
market than ever.

During the past few years, after the initial phase of privatization, the new entrants
have been busy developing new products, setting up the network, enrolling agents,
forming alliances with companies, banks and other intermediaries for distribution of
products, establishing systems for delivery of products, instituting risk management
systems to facilitate underwriting to facilitate underwriting and the like. In the
current ongoing phase, the companies are expected to consolidate their operations
and further enhance their market share with the infrastructure that has already been
created. The new life insurers have been infusing capital periodically to maintain
their solvency positions.

The nest few years will be critical for all the insurance companies, as the sector is
poised for higher growth. While the nationalized insurers will be endeavoring to
protect their market share, the new entrants will be vigorously aiming to further
improve their market standing. Each company in the industry will focus on
harnessing its strengths and improving its competitive position.

7
Going forward, with new and innovative product offerings, expanding distribution
channels and good economic prospects, the Indian Insurance Sector is expected to
witness great competition and growth opportunities. Also the Private Sector
insurers, both in Life and Non-Life segments, with international affiliations are likely
to become more aggressive. This is expected since the international insurers are
increasingly focusing on the Asian Region, including India to maintain their overall
growth.

3.2 Market Potential

With largest number of life insurance policies in force in the world, insurance
happens to be a mega opportunity in India. It’s a business growing at the rate of 15-
20 percent annually and presently is of the order of Rs. 450 Billion. Together with
banking services, it adds about 7 percent to the country’s GDP. Gross premium
collection is nearly 2 percent of GDP and funds available with LIC for investments are
8 percent of GDP.

In terms of Insurance Penetration Ratio (defined as ratio of insurance premium to

GDP), a key indicator of the spread of insurance coverage and insurance culture,
India compares poorly by International standards. The penetration ratio was less
than one percent in 1990s and improved to 4.8% by the end of March 2006 as
against in U.K. and Switzerland at 16.5% and 11%. Even in Asia, Taiwan and South
Korea has registered their respective ratio of as high as 14.5% and 11%. Insurance
Penetration ratio for the world was placed at 7.5% far greater than that of India.
(Appendix 3).

A scientific estimate of the market potential has to take into account factors such as
quantum of population un-insured, the level of under-insurance among those
insured, income levels across age groups, urban rural mix, the workforce in the
organized and unorganized sectors etc.

Of the estimated insurable population of 352 Million in 2004, only a mere 8% was
covered by Life Insurance.

8
3.2.1 Insured Population in India.

Estimated Workforce in India in 2004 : 351.6 Million

(Organised + Unorganised)

New Policies issued in 2004 by Life Insurance Companies : 28.6 Million

Insurable Population covered : 8.1%

It may be noted that the above 8.1% is not adjusted for people having more than
one policy. If this were factored in, then the proportion of insurable population
covered by Life Insurance would drop further. Similarly, it does not factor in a
workforce that would have taken out a policy in previous years but not in the current
year, which would translate into higher coverage.

Yet, nearly 90% of Indian population is without Life Insurance cover while health
insurance and non-life insurance continues to be below international standards. And
this part of the population is also subject to weak social security and pension
systems with hardly any old age income security. This itself is an indicator that
growth potential for the insurance sector is immense.

With such a large population and the untapped market area of this population,
insurance happens to be a very big business opportunity in India. Nearly 90% of
Indian population is without Life Insurance cover and Health Insurance cover. The
poor penetration ratio indicates that a vast majority of population remains outside
the reach of the insurance, especially in rural and semi-urban areas, in the context of
the absence of social security schemes. This clearly suggests the presence of vast
potential for tapping the insurance market particularly by widening the distribution
channels. This is an indicator that growth potential for the insurance sector is
immense in India.

9
4. Research Objectives

1. To examine whether or not Indian retail bank customers are aware of

insurance selling through bank branch networks and whether they are
willing to purchase insurance products from their banks.

2. To investigate the factors that influence Indian customer’s attitude towards

banks and insurance companies in relation to the provision of insurance
products.

3. To identify the reasons that Indian customers would buy insurance products
from banks and the specific insurance products that could be cross-sold by
banks.

5. Methodology

A survey was conducted with a target population comprising men and women of over
21 years old, who have transactions with banks or an insurance company.
Convenience Sampling was used for survey. The final questionnaire was
administered personally to 115 participants, representing both genders and different
age groups. The respondents were from Delhi, the capital of India. The survey was
done in the month of September 2008.

5.1 Questionnaire Design

A questionnaire consisting of 14 questions was administered. The questionnaire has

been adapted from the study of Lymberopoulos K et al (2004). The questionnaire
was pilot tested in Delhi and based upon the feedback appropriate changes were
made to improve the questionnaire to make it more respondent friendly.

In the first part, participants were requested to state their usage of insurance
products, their awareness about banks selling insurance products and their co-
operation with banks and insurance companies.

In the second part, customer’s willingness to buy certain insurance products from
their banks was explored. In the next part of the questionnaire, customer’s attitudes

10
towards the main distribution channels were measured on three dimensions –
trustworthiness, self competence and service expertise. Specifically, participants
were asked to express their consent level with 14 statements, which were related to
whether they preferred the insurance agent or the bank. For the measurement of all
these items a five-point Likert Scale was used (1 = strongly disagree to 5 = strongly
agree).

In the last part, questions relating to the demographics of the respondents were
included. Specifically, gender, age, education and income were later on divided
according to their current use of insurance products: light (up to two products),
medium (three to five products) and heavy users (more than six products).

6. Results
Table 1: Respondent’s Profile

Gender Number Percentage

Male 65 57
Female 50 43

Age

21-30 25 22
31-40 28 24
41-50 32 28
51-60 18 16
60+ 12 10

Education

High School 8 7
Graduates 56 49
Post Graduates 35 30
Doctorate 4 3
Others 12 11

Annual Income

Rs 2.lacs-4 lacs 21 18
Rs 4 lacs-6 lacs 34 30
Rs 6 lacs-8 lacs 24 21
Rs 8 lacs-10 lacs 19 16
Rs 10 lacs + 17 15

11
Table 2: Profile of customers who have already used their
Bank in order to buy Insurance Products.

Age 21-30 31-50 51 + Total

years years years
Number of Users/Total 25/115 60/115 30/115 115
Number
Percentage 22 52 26
Gross Monthly Income 2 to 6 lacs 6 to 10 10 lacs +
(Rs.) lacs
Number of Users/Total 55/115 43/115 17/115 115
Number
Percentage 48 37 15
Education High Graduates PG &
School above
Number of users/Total Number 8/115 56/115 51/115 115
Percentage 7 48 44
Number of products used Light Medium Heavy
Number of users/Total Number 52/62 26/32 16/21 115
Percentage 84 81 76

Exploring the current use of Insurance Products & Bancassurance Services

It has been observed from the data collected that every respondent has got at least
one insurance product. The insurance products with the highest usages are Vehicle
Insurance (100%) and Life Insurance (84%).

Table 3: Current use of Insurance Products

Number Percentage
I use Vehicle Insurance 115 100
I use Life Insurance 84 73
I use Health Insurance 38 33
I use Home Insurance 32 28
I use Pension Insurance 22 19
I use Unit Linked Plans 76 66

Exploring the reasons Customers would buy Insurance Products from Banks

The respondents emphasized on Trust, Personal relationship and Convenience as the

main reasons for buying the insurance products from banks instead of Insurance
Agents. This is shown as percentage-wise in Table 4.

12
Table 4: Reasons for buying Insurance Products from Banks instead
of Insurance Agents

Reason Number Percentage

Existing Personal Relationship 89 77
Trust 96 83
Convenience in terms of location 76 66
Communication 58 50
Good Financial Terms 66 57
Expertise 73 63
Related Services 66 57
Service Quality 85 73

Exploring Awareness and Willingness

86% out of the sample were aware of the fact that their bank sells Insurance
Products. It was reported that the published marketing material (89%) and
advertisement (Media-83%) available within the branch are the two main
information sources for these customers.

Table 5: Sources of Information about the Provision of Insurance

Products by Banks.

Source of Information Number Percentage

Advertisement (Media) 95 83
Bank Employees 85 74
Reference viz. Friends, Colleagues 56 48
Direct Mail 62 54
Published Material (In branch) 103 89

Table 6: Profile of Customers aware that their bank sells Insurance

Products

Age 21-30 years 31-50 years 51+ years Total

No. of aware customers 20/25 52/60 22/30 115
Percentage 80 87 73
Gross Monthly Income Rs 2 to 6 lacs 6 to 10 lacs 10 lacs + Total
No. of aware customers 48/55 36/43 10/17 115
Percentage 87 84 59
Education High School Graduate PG & + Total
No. of aware customers 3/8 46/56 45/51 115
Percentage 37 82 88
Number of Products used Light (1-2) Medium Heavy Total
(3-5) (6-7)
No. of aware customers 52/62 26/32 16/21 115
Percentage 84 81 76

13
Table 7: Willingness to buy Insurance Products from Bank according
to awareness

(Total 115 Respondents) Aware = 94, Not Aware = 21

Number Percentage Number Percentage

I would buy Vehicle 82 87 10 48
Insurance from Bank
I would buy Life Insurance 51 54 8 38
from Bank
I would buy Health 65 69 15 71
Insurance from Bank
I would buy Pension 78 83 15 71
Insurance from Bank
I would buy Home Insurance 82 87 15 71
from Bank
I would buy Unit Linked 64 68 7 37
Insurance Plan from Bank
I would buy at least one 90 96 19 90
Insurance Product from Bank

 (Not directly asked but calculated from other responses)

Exploring Consumer Attitudes to Insurance Agents

Analysing customer attitudes to two different distribution channels was calculated by

getting the mean of 14 statements on Likert Scale. Among the given statements,
bankers have been rated as better experts than to Insurance Agents. The trust level
is again better in Bankers than in Insurance Agents. Further it has been observed
that customer’s attitude towards Insurance Agents is low as compare to Bankers.

14
Table 8 : Customer’s attitudes towards Trustworthiness, Competence
and Service Expertise of Banks and Insurance Companies based on
Mean Scores.

Each Statement begins with : To what extent do you agree.

Code Statements Mean Std.

Dev.
A Do you think that your Insurance Agent is expert in 2.03 0.73
Insurance Products?
B Do you think that your Insurance Agent can advise you on 2.14 0.84
Insurance Products?
C Do you think that your Insurance Agent gives you all the 2.23 0.84
information needed?
D Would you trust Insurance Agent over Bank Employees? 2.39 1.02
E Do you think that Bank Employees give all the information 2.33 0.96
needed?
F Do you think that Bank offers competitive Insurance 2.35 0.9
Products?
G Do you trust Bank for all your Financial Requirements? 2.38 0.9
H Do you think that Bank employees will not push you to buy
an Insurance Product? 2.49 1.13
I Do you trust your Insurance Agent? 2.08 0.64
J Do you trust the Bank Employees? 2.34 0.87
K Do you think that Bank Employees can advise on Insurance? 2.32 0.79
Products?
L Do you feel that your Insurance Agent will not push you to
buy an Insurance Product? 2.83 1.21
M Do you think that Bank Employees have sufficient expertise 2.83 1.12
in Insurance Products?
N Do you trust Insurance Company for all your financial needs?
2.62 1.01

The factor analysis was also performed after calculating the mean, using the SPPS
Software. As per the findings shown in Table 9, two distinct factors explaining
34.879 % of total variance were identified using the Kaiser criterion. It is common
practice for factor loadings of 0.7 for consideration of significance in a factor
analysis. However, these loadings are not always easy to obtain with questionnaires
not designed specifically for this purpose. A 0.5 loading, which represents a
moderate loading, was chosen in this study to act as a threshold and allow the
inclusion of certain items in the scale created.

The first factor which includes questions on “Trust in Banks” explained 19.32% of
total variance, while the second one, which included question on Insurance Agents at
A,B,C,D explained 15.55% of total variance. Additionally, alpha cronbach test values

15
for both factors were (af 1 = 0.7148 and af 2 = 0.6951), which indicates the
existence of reliable scales.

Table 9: Factors Related to Customer’s Attitude to Insurance

Distribution Channels

Channel Code Statements F1 F2

Bank O Trust the Bank Employees 0.762
P Trust Bank for all your financial decisions 0.69
Q Bank Employees are expert in Insurance 0.57
Products
R Bank Employees provide all the information 0.559
needed
S Bank Employees can advise on Insurance 0.559
Products
Insurance T Insurer can advise you on Insurance Products 0.684
Agent
U You would trust an Insurer more than a Bank 0.641
Employee, while purchasing Insurance Products
V Insurer is expert in Insurance Products 0.641
W Insurer gives you all the information needed 0.632

Extraction Method : Principal Component Analysis.

Rotation Method : Varimax with Kaiser Normalisation

Rotation converged in 3 iterations.

We can observe from the above table that factor loading of few statements like O,P
and Q have got good impact on the customers in their responses towards their
attitude about banks as their insurance agents as statements O has got good
correlation with customers attitudes towards banks with the factor loading of 0.762.
And as far as customer’s attitude towards insurance agents is concerned, statements
like T, U and V are giving very high factor loadings which state that these statements
have got a substantial impact on customers while answering the questions related to
the Insurance Company.

16
7. Discussion

The main objective of this study was to find out the response of customers of 20
different Banks towards Bancassurance. This will help in devising further strategies
in India to cross-sell insurance products through network of bank branches. In
addition, there was an effort to investigate the areas of insurance products portfolio
that could have a better potential to be sold by banks and to identify the profile of
potential customers.

It has been observed through the Research Findings that all the consumers are
availing insurance products. The highest usage rates are for vehicle and Life
Insurance products (Table 3). This could be related to the fact that vehicle insurance
is legal requirement in India and Life Insurance offers both security cover as well tax
benefits.

A great opportunity for banks comes from the fact that only 13 Percent of insurance
users have already used their banks as insurance providers. Of those customers, the
majority belongs to the higher income groups. These are middle aged citizens and
medium users of insurance products (Table 2). The reason may be attributed to the
fact that they belong to the banks target market segments and as such, as a
customer group receives special attention.

This research managed to identify that the “customer relationship management”

should be the focus area for the bancassurance companies as more than 75% of the
customers said that they would prefer to buy insurance products from banks due to
existing personal relationship with banks (Table 4). The customer relationship
management will in turn help in building “Trust” which has got highest priority from
the customers.

The banks that offer bancassurance should think of new media channels to reach the
customers. Table 5 clearly shows that advertisements are one of the main source of
information for customers. Better trained bank employees as well as the informative
marketing material can give boost to business. The awareness that banks offer
insurance products is low among youth and senior citizen groups. Since India has
youth close to 50% of its population with high disposable income, the banks should

17
target them on priority. Table 7 also shows that informed customers are more
willing to purchase insurance from banks than those of not-so-well informed.

Therefore, Banks in India should try to exploit the existing opportunities to cross-sell
insurance products through their branch network, by designing a clear and effective
marketing strategy aimed at increasing awareness and customer’s willingness to
choose banks as insurance providers. Banks should focus an integrated marketing
communication strategy that encompasses advertising, public relations and direct
marketing in order to inform their customers about the provision of insurance
services via their branch network.

To summarise, one may conclude that opportunities exist for banks to cross-sell
insurance products. These opportunities are based on customers high usage rate of
insurance, the low penetration of banks to insurance programs and customer’s
willingness to buy insurance from banks. Moreover, the identification of specific
insurance products and certain customer segments enhance the bank’s efforts to
cross-sell insurance products.

8. Limitations of Research

The Research was conducted only in Delhi. A more diverse sample across different
cities might show that there is a difference in customer’s attitude to distribution
channels.

Another limitation is the sampling technique. Convenience sampling was used in this
study whereas the probability sampling is expected to give better results.

18
 Appendix -1

Insurance Products distributed by Banks – Country wise

Countries Proportion of Insurance Products

distributed by Banks.

France 70
Portugal 69
Spain 63
Belgium 42
Ireland 30
Sweeden 22
Nederland 18
U.K 12

Note : The above data relates to the year 2000

Source: Sigma 2002, Swiss Re.

Appendix -2

List of Life Insurers

S.No. Name of the Company

1 Bajaj Allianz Life Insurance Company Limited
2 Birla Sun Life Insurance Company Limited
3 HDFC Standard Life Insurance Company Limited
4 ICICI Prudential Life Insurance Company Limited
5 ING Vysya Life Insurance Company Limited
6 Life Insurance Corporation of India
7 Max Newyork Life Insurance Company Limited
8 Met Life India Insurance Company Pvt. Limited
9 Kotak Mahindra Old Mutual Life Insurance Company Limited
10 SBI Life Insurance Company Limited
11 Tata AIG Life Insurance Company Limited
12 Reliance Life Insurance Company Limited
13 Aviva Life Insurance Co. India Pvt. Limited
14 Sahara India Life Insurance Co. Ltd.
15 Shriram Life Insurance Co. Ltd.
16 Bharti AXA Life Insurance Co. Ltd.
17 Future General Life Insurance Co. Ltd.
18 IDBI Fortis Life Insurance Co. Ltd.

Note : Source http:/www.irdaindia.org/productlist

19
 Annexure – 3

Insurance Penetration – International Comparison -2006

(Select European and Asian Countries)

Countries Life Non-Life Total

1 2 3 4
European Countries
U.K 13.1 3.4 16.5
Switzerland 6.2 4.9 11.1
France 7.9 3.1 11
Ireland 7.9 2.5 10.4
Netherland 5.1 4.3 9.4
Belgium 6.5 2.7 9.2
Portugal 6.1 2.9 9.
Germany 3.1 3.6 6.7
Asian Countries
Taiwan 11.6 2.9 14.5
South Korea 7.9 3.2 11.1
Japan 8.3 2.2 10.5
Hong Kong 9.2 1.2 10.4
Singapore 5.4 1.1 6.5
Malaysia 3.2 1.7 4.9
PR China 1.7 1.0 2.7
India 4.1 0.7 4.8
World 4.5 3.0 7.5
U.S.A. 4.0 4.8 8.8
Canada 3.1 3.9 7.

Note : Insurance penetration is measured by the ratio of Insurance Premium to GDP

(Percentage-wise)

Source : http:/www.swissre.com/resources/

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