Bancassurance

Project Report on:

Topic: Bancassurance
Submitted By:
NAME: Joyeeta Das
SEAT NO: __________
TYB.Com (FINANCIAL MARKETS)
Semester Vth
Submitted To:
University Of Mumbai
Project Guide:
Academic Year
2014-2015

Bancassurance

CERTIFICATE
This is to certify that the project entitled Bancassuarance
is successfully done by Joyeeta Das

During the Third

Year, Fifth Semester of B.com [Financial Markets] under

University Of Mumbai through the Thakur College of
Science & Commerce, Kandivali (East), Mumbai
400101.

_______________

_______________

Co-ordinator

Project Guide

Date: _________

______________

Principal

Place: ____________

____________________________
External Examiner

Bancassurance

DECLARATION
I

Joyeeta Das from Thakur College of Science &

Commerce, learner of T.Y.B.Com (Financial Markets),

semester V, Examination Seat no:-_________, here by
submit my project report on Bancassuarance .

I also declare that this project which is the partial

fulfillment of the requirement for the degree of T.Y.B.Com
(Financial Markets) of University of Mumbai, is the result
of my own efforts with the help of experts.

Date: __________

Bancassurance

ACKNOWLEDGEMENT

It gives me immense pleasure in presenting the project report on

Bancassuarance.
Firstly, I take the opportunity in thanking almightily and my parents
without whose continuous blessings, I would not have been able to
complete this project.
I would like to thank my project guide

Mrs. Rashmi V. Shetty

for her great help, valuable opinions, advice and suggestions in

fulfillment of this project.
I am also grateful to my co-ordinator Mrs. Rashmi V. Shetty for
always encouraging and given me new hope to do this project.
I convey my deep appreciation to them for sparing their valuable time
and efforts, so as to make me capable of presenting this project.
I am thankful to our college for all the possible assistance and support,
by making available the required books and the internet room which
have proved useful to me in successfully completing my project.
I hope that I have succeeded in presenting this project to the best of
my abilities.

Bancassurance

EXECUTIVE SUMMARY
Bancassurance in its simplest form is distribution of insurance product through a banks
distribution channels. It is the provision of insurance and banking product and services
through a common distribution channel or through a common base.

The motive behind bancassurance is to provide convenient services to the customers

. For Banks, it is a means of product diversification and a source of additional fee income.
Insurance company see bancassurance as a tool for increasing their market penetration
and premium turnover. The customer sees bancassurance as a bonaza in terms of reduced
price, high quality product and delivery at doorsteps.

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. The Indian as
well as global context both are taken into account.
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
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 customers.

Bancassurance

INDEX
Sr. No.

Particulars

Pg. No.

Introduction To Banking

Introduction To Insurance

10

Origin

11

Bancassurance- Introduction

11-12

Reasons for growing phenomena of bancassurance

13-14

Need For Bancassurance

15

Legal Requirements

16-18

Status Of Bancassurance in India

18-19

Bancassurance Across The Globe

19-20

10

Benefits Of Bancassurance

21-23

11

Demerits Of Bancassurance

24

12

Marketing And Distribution Channel

24-29

13

Emerging Trends

30

14

Challenges

31-32

15

SWOT Analysis

33-39

16

SBI Life Insurance

40-51

Bancassurance

17

Bancassurance Tie Up In India

51-52

18

Recommandation of committee constituted by IRDA on 53-54

Bancassurance.

19

Success Of Bancassurance

54-55

20

Measures To Improve Bancassurance

55

21

Conclusion

56-57

22

Bibliography

58

OBJECTIVES OF THE STUDY

Bancassurance
Primary Objective of my study on the topic Bancassurance is that this is relatively a new concept in
India and thereby I would like to enhance my understanding and improve my knowledge regarding
this topic & above all
Whereas the main objective of making this thesis stands to is research on the Bancassurance strategy
adopted by the banking companies. Today the customer is the king of the market and to satisfy his
wants and needs the industry has to adopt many strategies. The customers want everything under, one
roof, by thinking of this point the banking industry came up with BANCASSURANCE.

Research Methodology
Data collection is the process of gathering and measuring information on variables of
interest, in an established systematic fashion that enables one to answer stated research
questions, test hypotheses, and evaluate outcomes. The data collection component of research
is common to all fields of study including physical and social sciences, humanities, business,
etc. While methods vary by discipline, the emphasis on ensuring accurate and honest
collection remains the same

For this topic the data was collected through various means such as:o Internet
o Research Papers
o Interaction

Limitation Of The Study

Few banks have not opted for bancassurance.

Exhaustive list of clients are not available.
Bancassurance is in promotion stage only.

Introduction to Banking

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

Bancassurance

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

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

The development of the Indian banking sector has been accompanied by the introduction of
new norms. New services are the order of the day, in order to stay ahead in the rat race. Banks
are now foraying into net banking, securities, and consumer finance, housing finance,
treasury market, merchant banking etc.

They are trying to provide every kind of service which can satisfy or rather we should say
that it can delight the customers.

Entry of private and foreign banks in the segment has provided healthy competition and is
likely to bring more operational efficiency into the sector.

Banks are also coping and adapting with time and are trying to become one-stop financial
supermarkets. The market focus is to shifting from Mass banking product to class banking
product with the introduction of value added and customised product.

Introduction to Insurance Sector

Insurance may be defined as: -

Bancassurance
It is a contract between two parties where by one party undertakes to compensate another party for
the loss arising due to an uncertain events for which another party agrees to pay a certain amount
regularly.

In India, insurance has a deep-rooted history. Insurance in India has evolved over time heavily
drawing from other countries, England in particular.

The insurance sector in India has come as a full circle from being an open competitive market to
nationalization and back to a liberalized market again. The business of life insurance in India in its
existing form started in India in the year 1818 with the establishment of the Oriental Life Insurance
Company in Calcutta.

The Insurance Act, 1938 was the first legislation governing all forms of insurance to provide strict
state control over insurance business.

Today there are 14 general insurance companies and 14 life insurance companies operating in the
country. But today also the insurance companies are trying to capture Indian markets as not many
people are aware of it. The insurance sector is a colossal one and is growing at a speedy rate of 1520%.

Together with banking services, insurance services add about 7% to the countrys GDP. A welldeveloped and evolved insurance sector is a boon for economic development as it provides long- term
funds for infrastructure development at the same time strengthening the risk taking ability of the
country.

Origin
The first countries to venture into the field were Spain and France. In the early 70s, ACM
(Assurances du Crdit Mutuel) Vie et IARD (life and general insurance) were officially

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Bancassurance

authorized to start operations, a watershed event in the history of insurance. It was their idea
to bypass the middleman for loan protection insurance and to insure their own banking
customers themselves. They thus became the precursors of what 15 years later would
become bancassurance. For their part, the Spanish began their adventure in the early 1980s,
when the BANCO DE BILBAO Group acquired a majority stake in EUROSEGUROS SA
(originally LA VASCA ASEGURADORA SA, incorporated in 1968). However, their control
was initially only financial, since Spanish law prohibited banks from selling life insurance.
This legal barrier was removed in 1991. Today, the top five Spanish bancassurance
companies control one third of the market (Vida Caixa, BBVA, SHC Seguros, Aseval, Mapfre
Vida) However, from a purely historical point of view, the real pioneers were the British with
the creation of Barclays Life in September 1965. This subsidiary was not a great success in
the UK, and nor, for that matter, was the concept of bancassurance.

Bancassurance- Introduction
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. 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 is a French term referring to the selling of insurance through a bank's
established distribution channels. In other words, we can say Bancassurance is the provision
of insurance (assurance) products by a bank. The usage of the word picked up as banks and
insurance companies merged and banks sought to provide insurance, especially in markets
that have been liberalised recently.
Bancassurance is the selling of insurance and banking products through the same channel,
most commonly through bank branches. Bancassurance has become significant. Banks are
now a major distribution channel for insurers, and insurance sales a significant source of
profits for banks. The latter partly being because banks can often sell insurance at better

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Bancassurance

prices (i.e., higher premiums) than many other channels, and they have low costs as they use
the infrastructure (branches and systems) that they use for banking.
Bancassurance primarily rests on the relationship the customer has developed over a period
of time with the bank. And pushing risk products through banks is a much more cost-effective
affair for an insurance company compared to the agent route, while, for banks, considering
the falling interest rates, fee based income coming in at a minimum cost is more than
welcome.
Bancassurance encompasses terms such as `Allfinanz' (in German), `Integrated Financial
Services' and `Assurebanking'. This concept gained currency 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
sources for the distribution of insurance products. Presently, there s more activity here than
anywhere else. And everyone wants to jump onto the bandwagon for a piece of the action
cake. The insurance industry has finally woken up from its long slumber to an altogether new
awakening. It is the rise of a new dawn that has brought with it opportunities galore. From
innumerable insurers, to affordable and quality covers for the consumer, from increase in
distribution channels to incorporating information technology measures, from net selling to
bringing about increased transparency its all there. 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. Bancassurance is a longstanding dream of offering a seamless service of banking, life & non-life products. Banks
with over 65,000 branches & 65% of household investments are the backbone of the Indian
financial market. In India, there are 75 branches per million inhabitants. Clearly, that's
something insurance companies - both private and state-owned - would find nearly
impossible to achieve on their own. Considering it as a channel for insurance gives insurance
an unlimited exposure to Indian consumers. Banks have expertise on the financial needs,
saving patterns and life stages of the customers they serve. Banks also have much lower
distribution costs than insurance companies and thus are the fastest emerging distribution
channel.

Reasons for growing phenomena of Bancassurance

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Bancassurance

The opening up of the insurance industry to private sector participation in December 1999
has led to the entry of 20 new players, with 12 in the life insurance sector and eight in the
non-life insurance sector. Almost without exception these companies are seeking to utilize
multiple distribution channels such as traditional agency, bancassurance, brokers and direct
marketing. Bancassurance is seen by many to be a significant or even the primary channel.In
other Asian markets we have seen bancassurance make significant headway in recent times.
For example, bancassurance accounted for 24% of new life insurance sales by weighted
premium income* in Singapore in 2002. This is a significant increase on the equivalent 2001
statistic of 15% and is as a result of growth in significant bank-centric bancassurance
operations. In Hong Kong the figure for 2002 is expected to be at the 20% level for the same
basic reasons.
a.

Reasons for Banks' Eagerness to Collaborate with Insurance Companies

b.

Attraction of fee income

Diversion of surplus workforce
Development of product range

Reasons for Insurance Companies' Eagerness to Collaborate with Banks

c.

Reliance on wide network

Attraction of strong clientele base
Aggressive marketing strategies

Reasons for Consumers' Eagerness to Welcome Bancassurance

Consumer perception is itself a very dynamic phenomenon. Today's customer is very

demanding and sensitive too. Customer expectations in respect of service quality are

quite high.
Consumers insist on respectable behaviour from their banker. When there are so many
operators, they can always switch over their loyalty at any moment. There is a
challenge before service providers that their clientele base is retained.

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Bancassurance

In regard to quality of service, our public sector banks are certainly required to

redefine their priorities and strategies because very often they are labeled as poor.
The competitive state of market suits the consumer as customer care is always better.
The customer will be benefited the most if the market is developed and competition is
aroused to a greater extent.

Banks

Insurance

Customer retention

Satisfaction of more financial need under

Revenue diversification

More Profitable resources utilization.

Enrich work environment.

and

channel

of

diversification

same roof.

Revenues

Quality customer access.

Establish a low cost acquisition

channel.

Establish sales orientated culture.

Creation of Brand Image.

Leverage service synergies with

Quicker Geographical reach.

Bank.

Need for bancassurance in India: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

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Bancassurance

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. 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.

The Legal Requirements:

15

Bancassurance

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.

Following the issuance of Government of India Notification dated August 3, 2000,

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

1. Any scheduled commercial bank would be permitted to undertake insurance business as

agent of insurance companies on fee basis, without any risk participation. The subsidiaries of
banks will also be allowed to undertake distribution of insurance product on agency basis.

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 per cent of the paidup capital of the insurance company. On a
selective basis the Reserve Bank of India may permit a higher equity contribution by a
promoter bank initially, pending divestment of equity within the prescribed period.

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Bancassurance

3. In cases where a foreign partner contributes 26 per cent 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. Subsidiaries would include bank subsidiaries
undertaking merchant banking, securities, mutual fund, leasing finance, housing finance
business, etc.

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

The eligibility criteria for these banks will be as under :

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

6. All banks entering into insurance business will be required to obtain prior approval of the
Reserve Bank. The Reserve Bank will give permission to banks on case to case basis keeping
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in view all relevant factors including the position in regard to the level of non-performing
assets of the applicant bank so as to ensure that non-performing assets do 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
and that the banking business does not get contaminated by any risks which may arise from
insurance business. There should be arms length relationship between the bank and the
insurance outfit

Status of Bancassurance in India

Reserve Bank of India (RBI) has recognized "bancassurance" wherein banks are allowed to
provide physical infrastructure within their select branch premises to insurance companies for
selling their insurance products to the banks customers with adequate disclosure and
transparency, and in turn earn referral fees on the basis of premium collected. This would
utilize the resources in the banking sector in a more profitable manner.
Bancassurance can be important source of revenue. With the increased competition and
squeezing of interest rates spreads profit of the are likely to be under pressure. Fee based
income can be increased through hawking of risk products like insurance.
There is enormous potential for insurance in India and recent experience has shown massive
growth pace. A combination of the socio-economic factors are likely to make the insurance
business the biggest and the fastest growing segment of the financial services industry in
India.
However, before taking the plunge in to this new field, banks as insurers need to work hard
on chalking out strategies to sell risk products especially in an emerging competitive market.
However, future is bright for bancassurance. Banks in India have all the right ingredients to
make Bancassurance a success story. They have large branch network, huge customer base,
enjoy customer confidence and have experience in selling non-banking products. If properly
implemented, India could take leadership position in bancassurance all over the world

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Bancassurance

Government of India Notification dated August 3, 2000, specified Insurance as a

permissible form of business that could be undertaken by banks under Section 6(1)(o) of the
Banking Regulation Act, 1949. Then onwards, banks are allowed to enter the insurance
business as per the guidelines and after obtaining prior approval of Reserve Bank of India.

In India, the concept of bancassurance has been recognized with its inclusion in the broader
ambit of universal banking. The RBI guidelines for banks' entry into insurance business,
issued on August 9, 2000, provide for banks (a) entering into insurance business with risk
participation and (b) carrying out insurance as a fee-based activity like insurance agents.
Earlier, the Government of India had also issued a Notification specifying 'Insurance' as a
permissible form of business that could be undertaken by banks under Section 6(l)(o) of the
Banking Regulation Act, 1949.

Bancassurance Across The Globe

Bancassurance" is a term, which first appeared in France after 1980 to define the sale of
insurance products through banks distribution channels. But this term does not just refer
specifically to distribution. Other features, such as legal, fiscal, cultural and/or behavioral
aspects form an integral part of the concept of bancassurance. In fact, all these characteristics
combined can explain the marked differences in bancassurance across the globe. Although it
is clearly a predominant feature on some markets, representing over two thirds of the
premium income in Life Insurance, other markets do not appear to have chosen it as their
model.
This type of distribution is predominant in markets such as France, Spain and Portugal,
followed by Italy and Belgium. Bancassurance represents over 65% of the premium income
in Life Insurance in Spain, 60% in France, 50% in Belgium and Italy. -In these countries, in
only ten years, bancassurance has become widely recognized as a successful model.
In France, in the 1970s, banks had to contend with a mature and highly competitive market in
banking.
By making use of existing legislation in insurance, bancassurance has provided them with a
new source of profit,
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Bancassurance

Which served to diversify their banking activity and optimize their choice of products,
thereby increasing customer loyalty. Consumers were provided with simple solutions from a
one-stop shop addressing all their financial concerns: short-term liquidity, estate and
retirement planning, property purchase, protection against any unforeseen events in everyday
life. In 2000, bancassurance accounted for 35% of Life Insurance premiums; 60% of savings
premiums; 7% for Property Insurance and 69% of new premium income in individual
savings. This success has made France the leading individual savings insurance market in
Europe. In terms of premium income, it ranks first in bancassurance.
Spain, like France, is among the most developed markets in bancassurance.
Today, it represents over 65% of life insurance premium income compared with 43% in 1992.
However, this high growth rate is not specifically due to bancassurance, rather the whole of
the life insurance market, which has sustained a 30% increase per annum on average in the
past fifteen years. In the last decade, many international, often European, alliances have been
made between banks and insurance groups. This has concentrated the bancassurance market,
which was originally highly fragmented.
On the Spanish market, bancassurance developed more quickly because of the wellestablished network of regional building societies, which today account for 50% of Life
insurance premiums in the bancassurance sector.

Benefits of Bancassurance
20

Bancassurance

The company is targeting around 10%of the business during its startup phase. Bancassurance
makes use of various distribution channels like salaried agents, bank employees, brokerage
firms. Direct response, Interest etc. Insurance Companies have complementary strengths. In
their natural and traditional roles Bancassurance if of great benefit to the customer. It leads to
the creation of one- stop where a customer can apply for mortgages, pensions, savings and
insurance products. The customer gains from both sides as costs get reduced. Bancassurance
for the customer is a bonanza in terms of reducing charges, a high quality product and
delivery at the doorstep.
Both insurance companies and banks have certain competitive advantages.

Banks enjoy the following advantages over insurance companies.

Most banks have strong brand name. The Bank's physical presence in the public areas
is an added reassurance to the people. In an old - fashioned way, people like to see
that the insurer remains within sight, over the years.

Their relationship with their customer is based on trust.

Banks have a wide network of branches which constitute an excellent distribution

channel.

Banks own the financial transaction history of their customer. This allows them to
build detailed profiles of every single customer using data management techniques.
They can then devise individually tailored products to meet the specific needs of each
customer.

Banks are also known for proving a complete range of services. A research study
conducted among insurers revealed that around 33% of the respondents felt that retail
customers were likely to buy multiple financial service product from Banks compared
to this.

Banks can earn more profit by selling new products from the existing strong
organisation's resources and structure.
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Bancassurance

Bancassurance increases the fee Income(commission), strengthen long term client

relationship and competitive pressure.

Bankers have extensive experience in marketing. They can easily attract customers.

The broadening of its product range makes the bank more attractive and can reinforce
customer satisfaction and therefore customer loyalty will be increases.

Opportunity to increase the productivity of staff, as they now have the chance to offer
a wider range of services to clients.

Insurance Companies enjoy the following advantages over insurance companies.

The ability to tap into banks huge customer bases is a major incentive. The extensive
customer base possessed by banks is considered to be ideal for the distribution of
mass-market products.

On the other hand, insurers can make use of the wide reach of bank customers to
categorise potential clients in detail according to their needs and values.

With increasing sophistication on bancassurance operations, some insurers can focus

on the high-net-worth segment, which offers greater potential for wealth management
business.

Apart from the ability to tap into new customers groups, escaping from the high cost
of captive agents is another reason prompting insurers to look into alternative
channels. In some cases, teaming up with a strong bank can help to fund new business
development and boost public confidence in the insurer.

Reduce their reliance on traditional agents by making use of the various channels
owned by the banks.

Share services with banks.

Develop new financial products more efficiently in collaboration with their bank
partners.

Establish market presence rapidly without the need to build up a network of agents.

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Bancassurance

Obtain additional capital from banks to improve their solvency and expand business.

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

Easy access for claims, as banks are a regular visiting place for the customers.

Consumers :

Part of the lowering of distribution costs will be passed on to clients in the form of
lower premium rates.

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

It is likely that new products will be developed to better suit client needs, which
otherwise may not be available if banks and insurers worked independently. Examples
are overdraft insurance, depositors insurance.

The convenience offered by bancassurance should also increase customer satisfaction,

for instance, when it is possible to pay premium as well as to withdraw and repay cash
loans backed by life insurance policies through banks ATM s.

Just as important, is more than often a strategic step of financial service providers to
shift from being product-oriented and to focus on distribution and customer relations.

The people who are unaware of and/or are not in reach of insurance policies can be
benefitted through widely distributed banking networks and better marketing channels
of banks.

Bancassurance model assists customers in terms of reduction price, diversified

product quality in time at their doorstep service by banks.

Demerits of bancassurance:23

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.

The bancassurance policies are sold mostly by bank executives, who arent licensed
by the IRDA to sell insurance policies. As a result they are under qualified and not
fully educated about the workings of the insurance industry. This is a major drawback
as these executives have often been accused of selling policies just to meet their
targets and not to really help the policyholders.

Marketing and Distribution Channels in Bancassurance

One of the most significant changes in the financial services sector over the past few years
has been the growth and development of bancassurance. Banking institutions and insurance
companies have found bancassurance to be an attractive and profitable complement to their
existing activities. The successes demonstrated by various bancassurance operations
particularly in Europe have triggered an avalanche of mergers and acquisitions across
continents and efforts are on to replicate the early success of bancassurance in other parts of
the world as well.
Distribution is the key issue in bancassurance and is closely linked to the regulatory climate
of the country. Over the years, regulatory barriers between banking and insurance have
diminished and has created a climate increasingly friendly to bancassurance. The passage of
Gramm-Leach Bliley Act of 1999 in US and IRDA Bill in India in 2000 have stimulated the
growth of bancassurance by allowing use of multiple distribution channels by banks and
insurance companies.
Bancassurance experience in Europe as well as in other select countries offers valuable
guidance for those interested in insurance distribution through the banking channel in

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developing markets. Many banks and insurers are looking with great interest at building new
revenue through bancassurance - including large, traditional companies that wouldn't have
considered such an approach about a decade ago. Of particular interest, many believe, is the
potential for bancassurance in developing economies such as those of Latin America and
Southeast Asia.
Distribution channels in Bancassurance
Traditionally, insurance products have been promoted and sold principally through agency
systems in most countries. With new developments in consumers behaviour, evolution of
technology and deregulation, new distribution channels have been developed successfully
and rapidly in recent years. Bancassurers make use of various distribution channels:
-Career Agents
-Special Advisers
-Salaried Agents
-Bank Employees / Platform Banking
-Corporate Agencies and Brokerage Firms
-Direct Response
-Internet
-E-Brokerage
-Outside Lead Generating Techniques

The main characteristics of each of these channels 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 his contract. Despite this limitation on control, career agents with suitable
training, supervision and motivation can be highly productive and cost effective.
Moreover their level of customer service is usually very high due to the renewal
25

Bancassurance

commissions, policy persistency bonuses, or other customer service-related awards

paid to them.
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/or incentive packages.

Special Advisers:
Special Advisers are highly trained employees usually belonging to the insurance
partner, who distribute insurance products to the bank's corporate clients. Banks refer
complex insurance requirements to these advisors. 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:
Having Salaried Agents has the advantages of them being fully under the control and
supervision of bancassurers. These agents share the mission and objectives of the
bancassurers. Salaried Agents in bancassurance are similar to their counterparts in
traditional insurance companies and have the same characteristics as career agents.
The only difference in terms of their remuneration is that they are paid on a salary
basis and career agents receive incentive compensation based on their sales. Some
bancassurers, concerned at the bad publicity which they have received as a result of
their career agents concentrating heavily on sales at the expense of customer service,
have changed their sales forces to salaried agent status.

Platform Bankers:

26

Bancassurance

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 and the
representative being referred to may be a trained bank employee or a representative
from the partner insurance company.
Platform Bankers can usually sell simple products. However, the time which they can
devote to insurance sales is limited, e.g. due to limited opening hours and to the need
to perform other banking duties. A further 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.
In many set-ups, the bank employees are assisted by the bank's financial advisers. In
both cases, the bank employee establishes the contact to the client and usually sells
the simple product whilst the more affluent clients are attended by the financial
advisers of the bank which are in a position to sell the more complex products. The
financial advisers either sell in the branch but some banks have also established
mobile sales forces.
If bank employees only act as "passive" insurance sales staff (or do not actively
generate leads), then the bancassurer's potential can be severely impeded. However, if
bank employees are used as "active" centres of influence to refer warm leads to
salaried agents, career agents or special advisers, production volumes can be very
high and profitable to bancassurers.

Set-up / Acquisition of agencies or brokerage firms:

In the US, quite a number of banks cooperate with independent agencies or brokerage
firms whilst in Japan or South Korea banks have founded corporate agencies. The
advantage of such arrangements is the availability of specialists needed for complex
insurance matters and -in the case of brokerage firms - the opportunity for the bank
clients to receive offers not only from one insurance company but from a variety of

27

Bancassurance

companies. In addition, these sales channels are more conceived to serve the affluent
bank client.

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:
Internet banking is already securely established as an effective and profitable basis for
conducting banking operations. The reasonable expectation is that personal banking
services will increasingly be delivered by Internet banking. Bancassurers can also feel
confident that Internet banking will also prove an efficient vehicle for cross selling of
insurance savings and protection products. It seems likely that a growing proportion
of the affluent population, everyone's target market, will find banks with household
name brands and proven skills in e-business a very acceptable source of non-banking
products.
There is now the Internet, which looms large as an effective source of information for
financial product sales. Banks are well advised to make their new websites as
interactive as possible, providing more than mere standard bank data and current
rates. 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:

28

Bancassurance

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. Seminars
in particular can be very effective because in a non-threatening atmosphere the
insurance counsellor can make a presentation to a small group of business people
(such as the local chamber of commerce), field questions on the topic, then collect
business cards. Adding this technique to his/her lead generation repertoire, an
insurance counsellor often cannot help but be successful.
To make the overall sales effort pay anticipated benefits, insurers need to also help
their bank partners determine what the hot buttons will be for attracting the
attention of the reader of both direct and e-mail. Great opportunities await
bancassurance partners today and, in most cases, success or failure depends on
precisely how the process is developed and managed inside each financial institution.
This includes the large regional bank and the small one-unit community bank.

Emerging Trends

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

29

Bancassurance

The quest for additional growth and the desire to market to specific client segments
has in turn led some bancassurers to shift away from using a standardised, single
channel sales approach to adopting a multiple channel distribution strategy.

Some bancassurers are also beginning to focus exclusively on distribution. In some

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

Nevertheless, banks are starting to embrace direct marketing and Internet banking as
tools to distribute insurance products.

New and emerging channels are becoming increasingly competitive, due to the
tangible cost benefits embedded in product pricing or through the appeal of
convenience and innovation.

The marketing of more complex products has also gained ground in some countries,
alongside a more dedicated focus on niche client segments and the distribution of
non-life products.

The drive for product diversification arises as bancassurers realise that over-reliance
on certain products may lead to undue volatility in business income. Nevertheless,
bancassurers have shown a willingness to expand their product range to include
products beyond those related to bank products. Banks by and large are resorting to
either 'referral models' or 'Corporate agency model' to begin with.

Challenges

Bancassurance products, being "push" products, require a totally different mindset

and work culture. Whether the existing staff of banks can achieve this is a big
question. Have the Indian banks, which have Mutual Fund subsidiaries, succeeded in
selling mutual fund products through their bank branches? Certainly not. The issue of
cultural incompatibility can impede bancassurance business to a great extent.
Alternatively, if the insurance subsidiary of the bank has to maintain the entire
paraphernalia, comprising research, administrative, distribution and other staff, it

30

Bancassurance

would be too costly, and in some cases, the cost restrictions would not permit it to
indulge in this.

Further, since life products and banking products are similar, efforts to market the
former will be less cumbersome for the bancassurance company. However, non-life
products are entirely different from life or banking products and are far too complex,
with high counter-party and reinsurance risks, and hence, it would be difficult for
bancassurance companies to enter into general insurance business immediately, until
and unless they develop and retain the required skill.

The manner in which insurance profits develop poses a threat to successful operation
of bancassurance. An analysis of profit signatures, i.e., the time pattern over which
profits of the insurance sector develop, shows that worldwide, the breakeven period of
time before profits ranges between 6 and 8 years (unless the company is captive). For
life insurance business, this works out to 8-10 years. This is because initial
procurement costs are high. In some countries, commissions and expenses required to
earn first year's premium are much higher than 100 percent. In India, these stand at 90
percent for the first year's premium. On the other hand, distribution of profits is
tightly regulated. In India, only 5 percent of the actuarial surpluses can be distributed
as dividend,

LIC and the four subsidiaries of GIC are well established in their respective lines of
businesses. Opening up the insurance sector has also awakened them, and being old
players, they would like to take their competitors, who are new, by the horns. Thus,
they will strive to become more competitive, and will be buttressed by their financial
and non-financial strength, including the lobbying power. This would pose a threat to
the new bancassurers. Too much of competition may lead to accentuation of the
adverse selection and moral hazard problems, which may ultimately prove detrimental
to the insurance industry as a whole.

Success of bancassurance would also depend on the extent to which and how fast the
technology being used for banking operations can be used for meeting the technology
requirements for insurance business. Otherwise, banks will have to incur large
investments for putting in place the technological infrastructure for bancassurance
operations.

31

Bancassurance

In case of failure of the bancassurance operation, the bank runs the threat of image
risk and cannibalizing deposits (i.e. there may be a fear among the staff that
investment oriented life insurance products may eat into the deposit base of the
branches).

Insurance sales being commission/incentive driven, banks selling insurance products

may be required to provide incentive packages in addition to the regular remuneration
to drive the sales.

Maintaining the same service levels for insurance business as that for the banking
services may be one of the biggest challenge.

Private players in the insurance industry being new entrants are technology-savvy.
Banks, especially PSBs, have to rise up to the challenge and be willing to invest in
technology.

SWOT Analysis
A tool that identifies the strengths, weaknesses, opportunities and threats of an organization.
Specifically, SWOT is a basic, straightforward model that assesses what an organization can
and cannot do as well as its potential opportunities and threats. The method of SWOT
analysis is to take the information from an environmental analysis and separate it into internal
(strengths and weaknesses) and external issues (opportunities and threats). Once this is
completed, SWOT analysis determines what may assist the firm in accomplishing its
objectives, and what obstacles must be overcome or minimized to achieve desired results.
The point of a SWOT analysis is to help you develop a strong business strategy by making
sure youve considered all of your businesss strengths and weaknesses, as well as the
opportunities and threats it faces in the marketplace.

32

Bancassurance

As you might have guessed from that last sentence, S.W.O.T. is an acronym that stands for
Strengths, Weaknesses, Opportunities, and Threats. A SWOT analysis is an organized list of
your businesss greatest strengths, weaknesses, opportunities, and threats.
Strengths and weaknesses are internal to the company (think: reputation, patents, location).
You can change them over time but not without some work. Opportunities and threats are
external (think: suppliers, competitors, prices)they are out there in the market, happening
whether you like it or not. You cant change them.
Existing businesses can use a SWOT analysis, at any time, to assess a changing environment
and respond proactively. In fact, I recommend conducting a strategy review meeting at least
once a year that begins with a SWOT analysis.
New businesses should use a SWOT analysis as a part of their planning process. There is no
one size fits all plan for your business, and thinking about your new business in terms of its
unique SWOTs will put you on the right track right away, and save you from a lot of
headaches later on.
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. However to understand how this takes place one
would have to continue reading this article.

Strengths

Accurate Customer Details

The accuracy in customer details can do wonders. The data generated by many
sources lacks accuracy. But the accuracy of data is very high in bancassurance. This
helps in targeting right segment of customers for right policy. The communication
address and phone number of customers are updated on time and avoids waste of time
and resources in communication.
33

Bancassurance

Insurance Is Mandatory For Loans

The bank whenever offers loan bound to issue appropriate class of insurance too. It is
legally mandatory for a bank to club loan products with relevant insurance. For
example, life insurance is required for personal loan. In case of property insurance,
fire insurance is mandatory. Similarly, for different classes such as cattle insurance,
Agri insurance etc demanded while selling the loan products for the same.

Customized Policies at Lower Premium

The insurance policies are customized for bancassurance channel. The statistical
analysis of customer data helps to devise right set of policies for different customers.
The features and premium of insurance products designed for bancassurance channel
comparatively better than any other channel. In fact, the insurance policies are
lucrative in bancassurance channel.

Issuance of Very Special Class Insurance

The risky class of businesses will not be issued as it affects the profit of the insurer.
Some of the risky classes are weather insurance, cattle insurance etc. if the customer
approaches through bacassurance channel then the policies will be issued. In other
words, the risky policies are issued only bancassurance customer and not for others.

Good Numbers of Leads to Cross Sell

The bank customers can be targeted to sell insurance policies. The existing customer
database can be used to generate leads. As the number of sales leads increase the sale
closures also increases. Thus the more leads ends in more sale closure. The banks can
cross-sell insurance policies to its customers.

34

Bancassurance

Services Under One Roof for Customers

The customer can enjoy convenience of core banking products and insurance policies
under one roof. Otherwise the customer needs to run around in search of
different financial products to meet his needs time to time.

Relationship Based Business Model

The insurance is considered as concept selling. The sales executive cannot expect
immediate sale closure. Each phase of the sales process consumes time. The time
taken to follow-up etc is lengthy. The success of insurance sales is purely based on
relationship between the seller and the buyer. The bank employees can turn the
rapport created as policies.

Important Source of Income

The fee-based services increase the productivity of the employee as well as the bank
branch. The existing resources can be utilized to sell financial products. Otherwise the
insurance company needs to spend on resources. It is easy to train the bank employees
as they are graduates. Banks due to competition loses profit in core banking products
and it can be compensated in selling insurance products.

Weaknesses

Lack of Initiatives from Bank Employees

The bank employees should sell insurance in addition to their routine works. They
perceive insurance as a burden on their head without considering its benefits. They are
not interested in attending insurance training and suffer without product knowledge.
The initiatives to create rapport with insurance company employees are minimal.

Dependency on insurer Employee

The bank employees are solely depending on bancassurance executive for sales. The
sales executive can handhold in the initial time but not always. A bancassurance
35

Bancassurance

executive will be given handful of bank branches. It is difficult to manage and address
all the requirements simultaneously.

Customer Orientation Is Less

Most of the bank employees tend to sell the policies which can fetch maximum
benefits for them in terms of commission volume. But they forget to fulfill the
customer requirements. The bank employees are having profit orientation not
customer orientation.

Can Only Promote Tie-Up Insurer Products

As per IRDA guidelines, an insurer can have tie-up with any number of insurers. But
a bank can have tie-up with only one life insurer and one non-life insurer. Thus a bank
is restricted to sell only one bank products and cannot sell multiple insurers products
simultaneously.

Opportunities

Growing Channel of Marketing

The bancassurance generates significant proportion of premium for any insurer. The
bancassuance is inevitable as it generates huge premium next to agency channel. The
growth rate of bancassurance channel is exponential in recent years.

Dual Support Model

36

Bancassurance

The customer who takes the insurance policy through bancassurance channel is
expected to enjoy dual support. In other words, support from bank as well as
insurance company. The scope for better customer services is higher bancassurance.

Tax Payers Can Be Targeted

Every year during March, the sale of life insurance reaches its peak. At that time
selected customers (preferably tax payers) can be targeted for single premium
policies. In a nutshell the bank employees should be prepared to allot time for
insurance in March.

Sales Can Be Driven By New Campaigns

The insurers can devise new campaign to motivate bank employees for selling the
insurance policies. The winner of each campaign can be awarded with foreign tour,
gold, cash prizes etc. thus the inner urge to sell more and win can be increased.

Scope of Premium Payment through EMIs

As per IRDA regulations, the premium for non-life insurance cannot be paid in
installments. But the banks can pay the premium to insurer on behalf of the customer
and can collect premium from customers in installments. Thus the bank can extend
the comfort of premium installments to its customers

Threats

Insurance Becomes Additional Responsibility

The bank employees should sell insurance in addition to core banking activities.
During the introductory phase the burden will be extreme for them. But the bank
employee will be more comfortable in selling insurance as the time progresses. The
friction is more in the initial phase of the bancassurance tie-up. Those successfully
completes the first phase can really excel in selling insurance.

37

Bancassurance

Rapport Maintenance between Employees

The rapport between bank employee and sale executive is affected by variety of
factors. Some of the important factors are: the initiatives taken by bank employees
and executive, meticulous planning and allocation of time for selling insurance, the
number of branches under the supervision of executive etc. for example, if an
executive is allotted with more number of banks then the rapport level with each bank
employee is limited due to lack of time.

Brand Equity and Poor Service

Generally, out of bancassurance tie-up, the brand equity of the insurer is improved.
But the poor insurance service may dilute the bank brand equity. So the bank needs to
analyze the insurer carefully before tie-up. Otherwise poor insurance service may
hinder the sale of core banking products.

Competitive Quotes from Others

Sometimes, the premium quote of other channels is comparatively lower than the
bancassurance channel. More specifically, the direct marketing motor premium is
cheapest one. In such cases, the customer prefers to buy from the channel which
charges the lowest premium.

New Bancassurance Proposals

The bancassurance channel has limited contractual term and can be renewed
subsequently. Generally, each bank receives invitation from insurer to become
bancassurance channel partner. If bank gets profitable contract than the current one
then the present tie-up will come to an end.

38

Bancassurance

State bank of India Life Insurance

SBI Life Insurance is a joint venture between the State Bank of India and Cardiff SA of
France. SBI Life Insurance is registered with an authorized capital of Rs 1000 crore and a
paid up capital of Rs 500crores. SBI owns 74% of the total capital and Cardiff the remaining
26%.State Bank of India enjoys the largest banking franchise in India. Along with its 7
Associate Banks, SBI Group has the unrivalled strength of over 14,500 branches across the
country, arguably the largest in the world. Cardiff is a wholly owned subsidiary of BNP
Paribas, which is the Euro Zones leading Bank. BNP Paribas is one of the oldest foreign
banks with a presence in India dating back to 1860. Cardiff is ranked 2ndworldwide in
creditors insurance offering protection to over 35 million policyholders and net income in
excess of Euro 1 billion. Cardiff has also been a pioneer in the art of selling insurance
products through commercial banks in France and in 35 more countries. SBI Life Insurances
mission is to emerge as the leading company offering a comprehensive range of Life
Insurance and pension products at competitive prices, ensuring high standards of customer
service and world class operating efficiency.SBI Life has a unique multi-distribution model
39

Bancassurance

encompassing Bancassurance, Agency and Group Corporate. SBI Life extensively leverages
the SBI Group as a platform for cross-selling insurance products along with its numerous
banking product packages such as housing loans and personal loans. SBIs access to over 100
million accounts across the country provides a vibrant base for insurance penetration across
every region and economic strata in the country ensuring true financial inclusion. Agency
Channel, comprising of the most productive force of more than 25,000 Insurance Advisors,
offers door to door insurance solutions to customers.

Products Offered by SBI

Individual Plans:
Unit Linked Insurance Plans

SBI Life - Smart Wealth Builder

You may have ever changing needs, but as your preferred life insurance company, SBI
Life definitely understands all your financial & insurance needs. SBI Life - Smart
Wealth Builder, a unit linked, non participating, insurance plan is an attempt to meet
all your financial & insurance needs through a single product. You can use it the way
you like. You can choose your required life insurance cover subject to a minimum and
a maximum level.

40

Bancassurance

SBI Life - Smart Wealth Assure

SBI Life - Smart Wealth Assure is a Unit Linked non-participating Life Insurance
Plan. It is a single premium plan, wherein you have to pay premiums once and you
can

continue

to

enjoy

the

benefits

throughout

the

policy

term.

The plan helps you to enjoy market related returns along with insurance cover, with
just a single premium.

SBI Life - Saral Maha Anand

SBI Life - Saral Maha Anand is a product created just for you, which will pleasantly
surprise you with its sheer Simplicity and Convenience! It is a unit linked, non
participating life insurance plan, which lets you manage your investments according
to your risk appetite, giving you the power to realise market related returns on your
policy. You can choose your required life insurance cover subject to a minimum and a
maximum level.

SBI Life - Smart Scholar

Life begins afresh when you become a parent. Its a joy you never felt and a feeling
you never experienced. When your child takes baby steps towards you, nothing seems
more blissful.With this divine happiness comes a new sense of responsibility thats
close to your heart. You want to make your childs life a bed of roses or a tender
cushion.
At SBI Life, we understand your needs and provide you with a flexible and allencompassing solution: SBI Life - Smart Scholar, a non participating Unit Linked

41

Bancassurance

Insurance Plan.Secure your childs future by gaining from the financial markets. Our
specially crafted Smart Scholar Plan is as accommodating as you are to your child.

SBI Life - Smart Elite

SBI Life - Smart Elite is a Unit Linked Insurance plan - an exquisitely crafted
product, exclusively for special customers like you. It gives you flexibility to pay
premium(s) for limited term or single premium, with the freedom to stay invested and
protected for long term. Whats more, you have the power of choosing the option best
suited to your needs, at a very competitive rate.

SBI Life - Smart Power Insurance

To have a secure future, which takes care of the financial needs of the family in case
of any eventuality and to meet lifes various goals, it is important that one starts
saving early and regularly. We present to you, SBI Life - Smart Power Insurance, a
non-participating unit linked insurance plan which takes care of your insurance as
well as investment needs. The product comes to you at reasonable premium and is in
tune with the current investment scenario. It is a flexible product, which also takes
care of your liquidity needs. Additional protection requirement, due to changing
personal and/or financial circumstances, is also taken care by the product.

Child Plans

SBI Life - Smart Power Insurance

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Bancassurance

To have a secure future, which takes care of the financial needs of the family in case
of any eventuality and to meet lifes various goals, it is important that one starts
saving

early

and

regularly.

We present to you, SBI Life - Smart Power Insurance, a non-participating unit linked
insurance plan which takes care of your insurance as well as investment needs. The
product comes to you at reasonable premium and is in tune with the current
investment scenario. It is a flexible product, which also takes care of your liquidity
needs. Additional protection requirement, due to changing personal and/or financial
circumstances, is also taken care by the product.

Pension Plans

SBI Life - Saral Pension

Retirement - means giving up work and continuing to Celebrate Life!

SBI Life - Saral Pension is an Individual, Participating, Non Linked, Traditional
Pension Plan, which offers you complete safety from market volatility, by providing
you a secure future and a joyous retirement.

SBI Life - Retire Smart

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Bancassurance

Due to higher disposable incomes and breakthrough in medical sciences, longevity has
increased to a great extent. We are all living longer after retirement.Retirement may
sound distant to you at the moment. However, it could span as long as one-fourth of
our lifetime and is ever increasing; and not many of us have really noticed or even
thought about that.Moreover, many people underestimate how much they need to save
for retirement. Thus, for creating a retirement corpus, systematic & disciplined
investment is required during ones earning years.We present to you, SBI Life - Retire
Smart, a non-participating unit linked pure pension plan, which guarantees you
minimum of 101% of all premiums paid, when policy is in force, on Maturity/Vesting;
thus the downside risk in the market is protected to a great extent.

SBI Life - Annuity Plus

SBI Life - Annuity Plus, a traditional, non-participating immediate annuity plan, which
offers a comprehensive range of annuity options along with inbuilt flexibilities. It
provides an opportunity to you to maintain your standard of living.

Protection plans

SBI Life - Smart Shield

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Bancassurance

SBI Life - Smart Shield is a traditional non-participating pure term plan, which is a
one stop solution that meets all your insurance needs. With Options and benefits
specially tailored for those who want best financial protection at an affordable cost,
this is the perfect plan from your preferred insurance provider. Now your family stays
protected,

even

when

you

are

not

around.

SBI Life - Saral Shield

SBI Life - Saral Shield is a traditional non-participating pure term Insurance plan. At
an affordable cost, SBI Life Saral Shield provides cover for your family and ensures
that a proper safety net is created. Thus, it guarantees that there will be no
compromise on your dreams and ambitions for your loved ones.

SBI Life - eShield

SBI Life - eShield is an Individual, Non Linked, Non Participating pure

term plan, with options and benefits specially tailored for those who
want the best financial protection at an affordable cost.

SBI Life - Grameen Bima

The objective of this product is to provide life cover to the deprived sections of the
society at affordable costs thereby aiding them tide over difficult times in case of an
unforeseen event.SBI Life - Grameen Bima is an individual, pure term, microinsurance plan for the socially deprived and economically vulnerable segments of the
population.

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Bancassurance

Savings plans

SBI Life - Smart Money Back Gold

SBI Life - Smart Money Back Gold is a savings plan with added advantage of life
cover and cash inflow at regular intervals. It is a participating traditional money back
insurance plan, meeting your various financial obligations at crucial junctures by its
wide range of policy terms. Regular payments of Survival benefits are made at
different durations during the policy term. In the unfortunate event of death at any
time within the Policy Term, your nominee would receive the full Sum Assured plus
Simple Reversionary Bonus & Terminal Bonus (if any), irrespective of Survival
Benefits

already

paid.

SBI Life - Shubh Nivesh

SBI Life - Shubh Nivesh is a non- linked, with profit Endowment Assurance product
with an option of Whole Life coverage. The basic purpose is to provide Savings,
Income and Insurance Cover to you and your family. Not only you can save regularly
for your future but you also have the flexibility to receive the maturity amount as a
lump sum or as a regular income for a chosen period, depending upon your needs.

SBI Life - Saral Swadhan+

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Bancassurance

SBI Life - Saral Swadhan+ is an Individual, non-linked, non-participating, term

assurance product with return of premium. This product gives you a fixed life cover
throughout the policy term along with a guaranteed maturity benefit.

SBI Life - Flexi Smart Plus

SBI Life - Flexi Smart Plus is Individual, Participating, Variable Insurance Product,
which helps you in fulfilling your dreams. It also gives you flexibility to adapt to your
ever-changing needs, while assuring guaranteed benefits to take care of your savings.

Group plans
Corporate solutions:
1) Retirement solutions

SBI Life - Kalyan ULIP Plus

Gratuity, SuperannuationLeave Encashment.Savings for Retirement the must

benefits for your employees/ group members.and while deciding on how to manage
these sacred funds you would like to have a strong partner with an effective
solution.SBI Life - Kalyan ULIP Plus is a non-participating, unit linked fund based
group life insurance product. It offers features that benefit not only the Master
Policyholder but also to each Group Member. This plan is a one-stop solution to all
your fund management needs offered to employer-employee groups only. You get the

47

Bancassurance

flexibility of paying in your premium at any time during the year according to scheme
rules.

SBI Life - CapAssure Gold

This is a variable, non-linked non-participating fund based group insurance product.

The product would be offered only to employer employees groups i.e. to the
employers/ trustees/ State governments/ Central government/ PSUs who want SBI
Life to manage their employees gratuity, leave encashment and superannuation
benefit schemes. The nature of the schemes may be Defined Benefit (DB) or Defined
Contribution (DC) or Hybrid.This is an ideal plan which caters to the needs of the
group administrators / employers / trustees / State governments/ Central government/
PSUs who want to fund group members retirement benefits and other welfare
benefits.

SBI life - Swarna Jeevan

SBI Life Insurance introduces "SBI Life - Swarna Jeevan" a Group Immediate
Annuity Plan for Corporate Clients (ie.Employer-Employee groups) and other Group
Administrators, who wish to purchase annuity to provide for their annuity liability
(existing

or

emerging

or

both)

totally/partially

from

SBI

Life

The annuity payment to members starts right away (Technically, anytime within 12
months of Purchase depending upon periodicity chosen). All you need to do is choose
the annuity option. We at SBI Life will calculate the amount of each annuity payments
based on the purchase amount and life expectancy.

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Bancassurance

SBI Life - Gaurav Jeevan

SBI Life Insurance introduces SBI Life - Gaurav Jeevan for Central Government /
State Governments/ Government Enterprises and their agencies who wish to purchase
their annuity liability (existing or emerging or both) in respect of the annuity
payments for compensation to the land owners whose lands are being acquired.This
product will enable you to transfer your annuity liability; which in turn is taken care
by our in-house investment expertise and an investment approach best suited to the
nature of the liability. This protects you from deficits due to adverse changes in
demographic or economic scenario in the future.

2) Group protection plans

SBI Life - Sampoorn Suraksha

SBI Life - Sampoorn Suraksha is a yearly renewable group term insurance plan
offering excellent protection at affordable rates. This plan is available for different
formal and informal groups such as Employer-Employee groups, Borrower /
Depositor Groups, Professional / Affinity Groups etc.

SBI Life - Suraksha Plus

SBI life - Suraksha Plus a Non linked, Non-participating, Group Term Assurance
product to meet the needs of the group clients such as Employer - Employee Groups,
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Bancassurance

Non-Employer Employee homogenous groups who intend to provide life cover to

group

members

for

fixed

term.

Group loan protection plans

SBI Life - RiNn Raksha

The dream house, the best education for your kids, the latest car, an overseas
family vacation and much more. To fulfill these aspirations, most of us dont
hesitate to avail loans. Now, with SBI Life - RiNn Raksha, a group credit life
insurance plan, you can rest assured that your family will always enjoy the
assets, which you so lovingly acquired, without worrying about any liabilities. In
other words, live life Debt- Free!

Group micro finance plans

SBI Life - Grameen Shakti

The purpose of this product is to provide life insurance protection to the weaker
sections of the society, like people who are funded by Micro Financial Institutions or
NGOs or avail loan from Bank/ Financial Institutions through SHG.

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Bancassurance

SBI Life - Grameen Super Suraksha

The purpose of this product is to provide insurance cover at affordable cost to

economically weaker sections of society, such as group of individuals funded by
Micro Finance Institutions or NGOs or individuals availing credit facilities from
Bank/ Financial Institutions.SBI Life - Grameen Super Suraksha is a group term
assurance plan for rural people as well as for the economically vulnerable sections of
the society who seek life insurance protection without maturity benefit. This product
has been specially designed taking into consideration the insurance needs of such
sections of the society.

SBI has the largest banking network in the county. The bank is looking for
business from every customer segment of the bank rural and urban segments, upper, middle
and lower income segments /groups and corporate segment. Besides their own channels they
are planning to distribute products through other interested banking channels also. It is
expected that 2/3 rd of the premium income in expected to come by way of bancassurance
and the rest from the traditional agency channel as wellas ties up with corporate agents
(Sundaram Finance). SBI has also introduced group insurance to some well managed
corporate staffs.

SBI Life Insurance Company is the first among the 14 life insurance companies in the
private sector to post a net profit in 2005-06.There are life insurance players much more
aggressive than SBI and they have still not been able to break the record of SBI. Their
success is largely on the channel strategy and product strategy. Another aspect is their
superior investment performance. They have consistently, over the last two years, generated
11-12 per cent earnings from the investments.SBI Life Insurance is uniquely placed as a
pioneer to usher bancassurance into India. The company hopes to extensively utilize the SBI
Group as a platform for cross-selling insurance products along with its numerous banking
product packages such as housing loans, personal loans and credit cards. SBIs access to over

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Bancassurance

100 million accounts provides a vibrant base to build insurance selling across every region
and economic strata in the country.

BANCASSURANCE TIE UP IN INDIA

Life Insurance Tie ups:

Private Sector Companies:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.

Bajaj Allianz Life Insurance Co.Ltd.

Birla Sun Life Insurance Co. Ltd.
HDFC Standard Life Insurace Co. Ltd.
ICICI Prudential Life Insurance Co. Ltd.
ING Vysya Life Insuranc Co. Pvt. Ltd.
SBI Life Insurance Co. Ltd
Sahara India Life Insurance Co. Ltd.
Aviva Life Insurance Co. Inia Pvt. Ltd.
Kotak Mahindra OU Mutual Life Insurance Co. Ltd.
Max New York Life Insurance Co. Ltd.
Met Life India Insurance Co. Pvt Ltd.
Reliance Life Insurance Co. Ltd.
Shriram Life Insurance Co. Ltd.
Bharti Axa Life Insurance Co. Ltd.
Tata Aig Life Insurance Co. Ltd.

Public Sector Company:

1. Life Insurance Corporation Of India.

Non Life Insurance Tie ups:

Private Sector companies:

1)
2)
3)
4)

Royal Sundaram Allianz Insurance Co. Ltd.

Tata Aig General Insurance Co. Ltd.
Relaince General Insurance Co. Ltd.
IFFCO Tokio General Insurance Co. Ltd.
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Bancassurance
5)
6)
7)
8)
9)

ICICI Lombard General Insurance Co. Ltd.

Bajaj Allianz General Insurance Co. Ltd.
HDFC Chubb General Insurance Co. Ltd.
Cholamandalam MS General Insurance Co. Ltd.
Star Health And Alhed Insurance Co. Ltd.

Public Sector Comapnies

1)
2)
3)
4)
5)
6)

The New India Assurance Co. Ltd.

National Insurance Co. Ltd.
United India Insurance Co. Ltd.
The Oriental Insurance Co. Ltd
Export Credit Guarantee Corporation Ltd.
Agriculture Insurance Company Ltd.

RecommandationOF COMMITTEE CONSTITUTED BY IRDA ON

BANCASSURANCE.

As we have discussed earlier that banks are not allowed to sell insurance products of more
than one insurance company. But due to persistent request from the side of various life and
general insurance companies from the IRDA led to formation of a seven-member committee
in the mid of 2009 to look after the matter . The committee had to submit its report and to
examine the desirability for a differential treatment of insurance intermediation by banks
under the Bancassurance model consistent with intermediation best practices and modified
suitably to meet domestic regulatory requirements. The committee submitted its
recommendation on 26th May, 2011.

Following are some of the recommendations of the Committee :- channel and therefore there
is need to enact a comprehensive legislation to cover all aspects of the working of the
Bancassurance activities.

Banks should be allowed to tie up with any of the following two sets of insurers:Two in life insurance sector
The committee admitted that at present there is ambiguity on the organization and

practices of the Bancassurance.

Two in non-life insurance sector excluding health

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Bancassurance

Two in health insurance sector

ECGC and AIC.
Efforts should be made to more use of information technology which would reduce
the manpower requirement and would increased more structured, transparent and

efficient organization.
The tenure of the agreement between the banker and insurer is normally one to three
year at present. This makes the relationship between the two unstable, therefore the
minimum period of the agreement between the banker and the insurer shall not be less
than five years. Here, the committee also made a very significant point that the
responsibility of servicing of the policies issued already through the bank or
subsidiary or special purpose vehicle shall remain with the bancassurance partner
even if the tie-up ends and the said partner shall receive the renewal commission on
per renewed policy basis. For all this purpose there is need of proforma for
memorandum of agreement between bank and insurer with minimum requirement.

As far as inspection and supervision is concerned, the proposed regulation must contain
separate provision which empowers IRDA and RBI to inspect any of the Bancassurance
partner. The regulation must have provisions of maintaining accounts and certification which
should be furnished in periodicals returns to the authority. Corporate governance norms
regarding disclosure should be complied by the banks treating bancassurance as integral part
of banks business operation. Regulations should made it mandatory that the bank staff be
fully trained in handling insurance products so that the sale process is transparent and the
policyholder gets full disclosure of the features of the product. The committee gave the green
light for multiple insurers but only if a bank fulfils all other conditions specified in the
committees recommendations. The Committee recommended abolition of the referral system
of bancassurance because it is costlier than corporate agent model. The reason behind the
high cost is that the insurer has not only to pay the higher amount of first year premium as
referral fee but also has to deploy staff and infrastructure in the bank premises.

Success of Bancassurance

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Bancassurance

Banking and insurance have strong similarities that might have contributed to their
rapprochement, LIC and other insurance companies have developed a range of products, that
have direct conflict with traditional bank offering or products.

New companies in Life Insurance sector would be looking for cost effective channels for
distribution which provide long reach. Because of the existing extensive obviously emerged
as the preferred low cost distribution channel. This would also give the hold to, insurance
companies in the rural areas, thus providing an opportunity to tab the virgin market.
Banks have large client base and cross selling surely provides with an opportunity for
optimum utilization of their existing customer relationship thus effectively creating a winwin situation company and the operational difficulties at ground level have to be managed
and one of the suggested ways is to re- structure the bank compensation structure on the lines
of insurance companies.

Last but not the least, the issue of consumer protection will have to be suitably addressed by
Regulators and consumers themselves. Consumers though have consumer Protection Act to
inhibit banks and insurance companies to show monopolistic properties or use them as an arm
twisting techniques. Though all said and done, Regulators both IRDA and RBI should jointly
formulate a policy and process not to avoid the conflict of interest.

Measures to Improve Bancassurance in India:

Factors that are critical for success include strategies consistent with Banks vision,
knowledge of target customer's defined sales process for introducing insurance
services, simplest yet complete product offerings, strong service delivery mechanism,
quality administration, synchronized planning, all business lines and subsidiaries,
complete integration of insurance with other business products and services,
expensive and high-quality training of sales personnel.

Another critical point to be tackled is customer service(CRM). Bank should

implement Customer Relationship Management(CRM) strategies to handle the
customers tactfully.
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Bancassurance

Bank should act as financial adviser to the customers in the portfolio decisions and
also assist them in early claim settlement.

Bank and insurance company should work jointly towards a model global retail
financial institution offering a wide array of products which leads to creation of onestop shop for mortgages, pensions, and insurance products.

Conclusion
Traditionally banks transform short-term liabilities into long-term assets. This generates
credit risk on asset side and liquidity risk on the liabilities side. The maturity mismatch
between assets and liabilities exposes banks to interest rate risk and makes them more
vulnerable. The bank can address this specific issue by entering into insurance business. An
insurance activity accumulates substantial amount as premium receipt. With the long-term
fund, banks can decrease the possibility of liquidity and solvency problems. Even if banking
and insurance are carried out as separate entity, through a holding arrangement, the insurance
outfit can afford a potential source of liquidity for the parent.
All over the world, governments are known to intervene in the insurance business through
regulations to make insurance a catalyst of social development. The Indian government has
also issued detailed guidelines regarding this. IRDA has made it mandatory for every insurer
who started business after the commencement of IRDA Act, 1999 to ensure the prescribed
levels of business from rural and social sectors. The guidelines in this connection indicate that
the life insurer must cover a minimum rural business of five per cent in the first financial
year; seven per cent in the second financial year, ten per cent in third financial year; twelve
per cent in the fourth financial year and fifteen per cent in the fifth year of total policies
written during that year. In respect of a general insurer, the prescribed limit is - two per cent
in first financial year, three per cent in second financial year and five per cent thereafter of
total gross premium income of that year. In respect of social sector all insurers are suppose to
cover five thousand lives in the first financial year, seven thousand five hundred lives in
second financial year, ten thousand lives in third financial year; fifteen thousand lives in
fourth financial year and twenty thousand lives in the fifth financial year.
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Bancassurance

These rural and socially disadvantaged sectors are very difficult to service. They are scattered
geographically in small indigenous social groups. It is very difficult to identify their need and
design products that are viable as well as acceptable to these segments. In fact, the real issue
is cost effectiveness. These target clienteles can be addressed by spending substantial amount
of money by way of marketing research to identify their needs and promotional measures to
reach them. The coming together of banks and insurance can provide substantial synergy
here. The banks already have a massive infrastructure spread across the width and breadth of
the country. Banks possess a vast array of market intelligence including rural and
disadvantaged section of the society. This information can be leveraged to design appropriate
products for the specific requirements of target population. The widespread branch network
can be used as a marketing channel without incurring significant amount of money. Definitely
collaboration between banks and insurance companies can be of great benefit to service this
target group in a cost-effective and financially viable manner. In fact, it may be noted in this
connection that generally insurance company suffer from substantial amount of losses in the
early years of their operation. One of the contributory factors in this regard is social
obligations mandated by the government. International experience shows that even in
relatively developed countries it takes a long period of time to reach out to less privileged
regions and segments of population. Obviously, in India the problem is much larger and more
complex. Bancassurance is an appropriate strategy in this connection.
In a service industry such as insurance, which offers promises in return for payment upfront,
redemption of commitments has to be perfect. The claims settlement service is mostly
affected by problems in decision-making, causing enormous delays. Against this background,
joining of hands between banks and insurance offers double-edged solution. The existing
track record of banks in providing satisfactory services has been dismal to say the least. In
addition, a number of banks had to offer VRS to shed the excess manpower and introduce
technology into their service operations. Still, a whisper of next round of VRS can be heard in
the banking sector. In such scenario, if banks enter into new and fast growing sector like
insurance the problem of excess staff can be overcome without compromising the morale of
the workforce. Of course, banking personnel need rigorous training to adapt to insurance
business. In this context, one viewpoint is that the bank employees by their past track record
cannot be trusted to become customer-friendly overnight. But if we look at the developments
taking place over the last few years, we can say with confidence that bank employees in the
public sector have responded in a very encouraging manner to the challenges thrown at them

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Bancassurance

through competition by private sector banks. It implies that given the chance and requisite
training, they can also become successful in insurance sector.

Bibliography

http://publications.milliman.com/research/life-rr/archive/pdfs/New-Trends-In-WorldBancassurance-RR-10-01-04.pdf
www.banknetindia.com/finance/bancassurance_sigma.html
www.toostep.com/debate/bancassurance-in-india--success-or-failure
www.iracst.org/ijcbm/papers/vol3no32014/3vol3no3.pdf
www.scribd.com/doc/26820212/Bancassurance-An-Indian-Perspective
http://www.banknetindia.com/finance/ibanc.htm
http://www.gktoday.in/brief-history-of-banking-in-india/
www.bnpparibascardif.com
www.studymode.com
www.academia.edu/
www.sbilife.co.in

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