Gokhale Education Societys SHRI BHAUSAHEB VARTAK ARTS, COM. & SC. COLLEGE & SHETH K.V.

PAREKH ARTS &COM. Jr. COLLEGE Gokhale Mahavidyalay Marg, Borivali (w), Mumbai-400091 NAAC B+ & ISO 9001:2000
PROJECT REPORT ON BANCASSURANCE

SUBMITTED BY Mr. VIJAYAN M. ADIDRAVIDAR T.Y.B.Com. (Banking & Insurance) (Semester V)

SUBMITTED TO UNIVERSITY OF MUMBAI

PROJECT GUIDE Mrs. RAKHI PITKAR

ACADEMIC YEAR: 2009-2010

DECLARATION

I Master. Vijayan M. Adidravidar, student of Shri Bhausaheb Vartak Arts, Com. & Sc. College of T.Y.B.Com. (Banking & Insurance) (Semester V) hereby declare that I have completed this project on Bancassurance in the academic year 2009-2010. The information submitted is true & original to best of my knowledge.

Signature of Student Place: Mumbai Date:

ACKNOWLEDGEMENT
At this juncture, I would extend my sincere gratitude to a lot of people without whom this informative project would have been impossible. Every work that is appreciated is always supported by various hands. This project would just not be complete without the valuable contribution from various people whom I have interacted with in the course of its completion. I would like to express my gratitude to all those who gave me the possibility to complete this thesis. I want to thank my principle Dr. Mrs. S.V. Sant from Shri Bhausaheb Vartak Arts; Commerce & Science College who has always been a symbol of hope for me. I am deeply indebted to my coordinator and my project guide Mrs. Rakhi Pitkar from Shri Bhausaheb Vartak Arts, Commerce & Science college whose help, stimulating suggestions and encouragement helped me in all the time of research for and writing of this thesis. I have furthermore to thank my lecturers in the Shri Bhausaheb Vartak Arts, Commerce & Science College who helped me and encouraged me to go ahead with my thesis. I am bound to the staff members of Shri Bhausaheb Vartak Arts, Commerce & Science College for their stimulating support. My colleagues and seniors from Shri Bhausaheb Vartak Arts, Commerce & Science College supported me in my research work. I want to thank them for all their help, support, interest and valuable hints. Especially, I would like to give my special thanks to my parents for their endless love and support which helped me to complete this work.

EXECUTIVE SUMMARY
It gives me immense pleasure to present my project for Bancassurance .The whole experience is a gratifying one especially in terms of knowledge and information. This project gives you a brief knowledge of the following: Introduction and meaning of bancassurance, banking company and insurance company.

Different Models of bancassurance and various distributional channels through which bancassurance products are distributed.

Advantageous of Bancassurance to banks, to insurance company and the customers. Bancassurance in Indian scenario and global scenario comparison of both. Emerging trends and challenges in bancassurance and the factor for success of bancassurance This project would study and address the issues related to bancassurance, particularly in India. Strategic considerations at macroeconomic level on future outlook have also been discussed along with suggestions and recommendations to sustain the growth that it has witnesses till now.

The Case Study and Analysis is done as per the information provided to me by Mr. Rajesh Sheth Marketing Manager of Bank of India, Mr. Rakesh L. Singh and Shivaji Chandar Panchamukh SDM (Sales Department Managers) of HDFC Standard Life Insurance Survey analysis as well as SWOT analysis of bancassurance.

Research & Methodology

This project consist data which are collected from various sources. Normally there are two sources of collecting the data i.e. primary data and secondary data. In this project I have taken both primary as well as secondary data.

PRIMARY RESEARCH
Primary Research has been done to validate the information given in the project. This research has been extensively done via visit to a bank (BANK OF India) and an Insurance company (HDFC Standard Life Insurance). Interview from Rajesh Sheth, Marketing manager of Bank of India and two SDM (Sales Department Managers) of HDFC Standard Life Insurance Mr. Rakesh L. Singh and Shivaji Chandar Panchamukh have really proved helpful in completion of the project.

SECONDARY RESEARCH
The secondary data about the project is collected through various sources i.e. Books on the very topic. Various Websites. Newspaper Articles.

Magazines containing the information about the topic.

Objective of this project

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 I would definitely want to apply this information so gathered in my future career prospects. 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. Survey analysis of the customers is also done. 50 customers views are taken into consideration on Bancassurance which are shown through pie diagram and bar diagram in this project.

INDEX

SL. No. 1. Introduction

CONTENTS

PAGE NO. 1-7

1.1 Introduction to bancassurance 1.2 Introduction to banking 1.3 Introduction to insurance 1.4 Meaning of bancassurance 1.5 Bancassurance = insurance product + banks reach 2. 1.6 Regulatory Framework in India Bancassurance Models 2.1 Structural classification 2.2 Product based classification 3. 4. 2.3 Bank referrals Distribution Channels Advantages of bancassurance 4.1 Advantages to banks 4.2 Advantages to insurers 5 4.3 Advantages to consumers Indian scenario 5.1 Reasons for banks entering into insurance business in India 5.2 Policies Sold by Indian Insurance players via 6. Bancassurance Global scenario 6.1 Bancassurance business conducted by companies 6.2 Bancassurance in India VS Bancassurance in 7. 8. Asia & Europe Survey Analysis SWOT Analysis 8.1 Strength 8.2 Weakness 8.3 Opportunity 9. 8.4 Threats Bancassurance: Emerging Trends and Challenges 42-45 31-36 37-41 26-30 20-25 12-16 17-19 8-11

SECTION 1- Introduction Introduction to bancassurance Introduction to banking Introduction to insurance Meaning of bancassurance Bancassurance = insurance product + banks reach Regulatory Framework in India

Introduction to Bancassurance

The Banking and Insurance industries have changed rapidly in the changing and challenging economic environment throughout the world. In this competitive and liberalized environment everyone is trying to do better than others and consequently survival of the fittest has come into effect. This has given rise to a new form of business wherein two big financial institutions have come together and have integrated all their strength and efforts and have created a new means of marketing and promoting their products and services. On one hand it is the Banking sector which is very competitive and on the other hand is Insurance sector which has a lot of potential for growth. When these two join together, it gives birth to BANCASSURANCE. Bancassurance is nothing but the collaboration between a bank and an insurance company wherein the bank promises to sell insurance products to its customers in exchange of fees. It is a mutual relationship between the banks and insurers. Its a relationship which amazingly complements each others strengths and weaknesses. Standard Chartered Bank Forms Bancassurance Alliance with Eagle Insurance (09/26/2006). Bajaj Allianz Life Insurance has entered into bancassurance alliances with five co-operative banks including Manjeri Cooperative Urban Bank Ltd (Kerala) and Hubli Urban Cooperative). Dena Bank and Om Kotak Mahindra Life Insurance Company (OMKM) have announced a strategic alliance for bancassurance for Indian consumers (February, 2003).

This news is just few samples that kept on hitting the headlines one after the other in past few years. With the beginning of 21st Century, a new revolution in distribution of insurance products emerged. The synergies between the banking and insurance industry suddenly came to limelight and picked up like a wild-fire in a very short span. Equally interesting is the fact that the concept got appreciated across all the countries; developed and developing countries alike. Bancassurance, the provision of insurance services by banks, is an established and growing channel for insurance distribution, though its penetration varies across different markets. Europe has the highest bancassurance penetration rate. In contrast, penetration is lower in North America, partly reflecting regulatory restrictions. In Asia, however, bancassurance is gaining in popularity, particularly in China, where restrictions have been eased. The research shows that social and cultural factors, as well as regulatory considerations and product complexity, play a significant role in determining how successful bancassurance is in a particular market.

Introduction to Banking

Banking as per the Banking Regulation Act, Banking is defined as: 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 onestop financial supermarkets. The market focus is shifting from mass banking products to class banking with the introduction of value added and customized products.

Introduction to Insurance Sector

Insurance may be defined as: -

It is a contract between two parties where by one party undertakes to compensate 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 15-20%. Together with banking services, insurance services add about 7% to the countrys GDP. A well-developed and evolved insurance sector is a boon for economic development as it provides long- term funds for infrastructure development at the same time strengthening the risk taking ability of the country.

Bancassurance- Meaning

Bancassurance is the term used to describe the sale of insurance products in a bank. The word is a combination of banque or bank and assurance signifying that both banking and insurance is provided by the same corporate entity. Bancassurance is the distribution of insurance products through the banks distribution channel. It is a phenomenon wherein the insurance products are offered through the distribution channels of the banking services along with the complete range of banking and investment products and services. In concrete terms Bancassurance, which is also known as Allfinanz-describes a package of financial services that can fulfill both banking and insurance needs at the same time? As the name suggests, the concept started in France in 1980.Bancassurance has achieved remarkable success particularly in Europe. Bancassurance represents over 65% of the premium income in life insurance in Spain, 60% in France, 50% in Belgium and Italy. Bancassurance tries to exploit synergies between both the insurance companies and banks.

Bancassurance = Insurers Product + Banks reach:

To put in simple words, bancassurance is the provision of insurance banking products and services through the distribution channel of a bank or to a common client base. The usage of the word started picking up when the financial markets witnessed mergers and alliances between the two booming segments banking and insurance. According to a recent study, bancassurance is on the rise, particularly in emerging markets. Worldwide, insurers have been successfully leveraging bancassurance to gain a foothold in markets with low insurance penetration and a limited variety of distribution channels.

Banks world over have realized that offering value-added services such as insurance, helps to meet client expectations. Competition in the Personal Financial Services area is getting `hot in India. Banks seek to retain customer loyalty by offering them a vastly expanded and more sophisticated range of products. Customers also want a one-stop shop for all their financial needs. Therefore banks are trying to provide more services and integrate them into their business model. Bancassurance is one such initiative. Further the risks involved in doing this business is very low.

Banks are also trying to integrate this business into their own business. Customers would also get this benefit as these products are offered not only by their sales force but also by net banking and other IT enabled services like ATM etc. Insurance companies also have a wide range of insurance products catering to a wide range of needs. Bancassurance is beneficial for insurance companies as well as they would be cutting costs and cross-selling apart from the wider reach of their insurance products. In a country like India, where the need of insurance is not felt by customers, insurance companies should try to exploit every opportunity of selling their insurance products which Bancassurance promises.

Regulatory Framework in India

In India, the banking and insurance sectors are regulated by two different entities (banking by RBI and insurance by IRDA) and bancassurance being the combinations of two sectors comes under the purview of both the regulators. Each of the regulators has given out detailed guidelines for banks getting into insurance sector. The RBI requires any bank intending to undertake insurance business to obtain its prior approval. RBI guidelines for banks entering into insurance sector provide three options for banks. They are: Joint ventures will be allowed for financially strong banks wishing to undertake insurance business with risk participation. Any commercial bank will be allowed to undertake insurance business as agent of insurance companies. This will be on a fee basis with no-risk participation. Banks are entitled to referral fee on the basis of premium collected. The Monetary & Credit Policy of the RBI in October 2002 allowed banks to undertake referral business through their network of branches subject to certain restrictions. The Insurance Regulatory and Development Authority (IRDA) guidelines for the bancassurance are: Each bank that sells insurance must have a chief insurance executive to handle all insurance activities. Banks are included within the IRDAs Licensing of Corporate Agents Regulation 2002. All the people involved in selling should undergo

mandatory training at an institute accredited by IRDA and pass the examination conducted by the authority. Commercial banks, including cooperative banks and regional rural banks, may become corporate agents for one insurance company. Banks cannot become insurance brokers. The whole aim of the present regulatory framework is to ensure that any risks that may arise from insurance business dont affect banking business. In essence there should be an arms length relationship between the bank and the insurance company.

SECTION 2- Models, Channels and Advantages

Bancassurance Models Distributional channels Advantages of bancassurance 1. to Banking Companies 2. to Insurance Company 3. to Customers

Models of Bancassurance

Models of Bancassurance

Structural Classification

Product based classification

Bank Referrals

Stand-alone insurance products Referral Model Blend of Insurance, With Bank Products Corporate Agency

Insurance as Fully Integrated Financial Service/ Joint ventures

Structural Classification a) Referral Model

Banks intending not to take risk could adopt referral model wherein they merely part with their client data base for business lead of commission. The actual transaction with the prospective client in referral model is done by the staff of the insurance company either at the premises of the bank or elsewhere. Referral model is nothing but a simple arrangement, wherein the bank, while controlling access to the clients data base, parts with only the business leads to the agents/ sales staff of insurance company for a referral fee or commission for every business lead that was passed on. In fact a number of banks in India have already resorted to this strategy to begin with. This model would be suitable for almost all types of banks including the RRBs /cooperative banks and even cooperative societies both in rural and urban. There is greater scope in the medium term for this model. For, banks to begin with can resort to this model and then move on to the other models.

b) Corporate Agency
The other form of non-sick participatory distribution channel is that of Corporate Agency, wherein the bank staff as an institution acts as corporate agent for the insurance product for a fee/commission. This seems to be more viable and appropriate for most of the mid-sized banks in India as also the rate of commission would be relatively higher than the referral arrangement. This, however, is prone to reputational risk of the marketing bank. There are also practical difficulties in the form of professional knowledge about the insurance products. This could, however, be overcome by intensive training to chosen staff, and packaged with proper

incentives in the banks coupled with selling of simple insurance products in the initial stage. This model is best suited for majority of banks including some major urban cooperative banks because neither there is sharing of risk nor does it require huge investment in the form of infrastructure and yet could be a good source of income. This model of bancassurance worked well in the US, because consumers generally prefer to purchase policies through broker banks that offer a wide range of products from competing insurers.

c) Insurance as Fully Integrated Financial Service/ Joint ventures

Apart from the above two, the fully integrated financial service involves much more comprehensive and complicated relationship between insurer and bank, where the bank functions as fully universal in its operation and selling of insurance products is just one more function within. This includes banks having wholly owned insurance subsidiaries with or without foreign participation. The great advantage of this strategy being that the bank could make use of its full potential to reap the benefit of synergy and therefore the economies of scope. This may be suitable to relatively larger banks with sound financials and has better infrastructure. As per the extant regulation of insurance sector the foreign insurance company could enter the Indian insurance market only in the form of joint venture, therefore, this type of bancassurance seems to have emerged out of necessity in India to an extent. There is great scope for further growth both in life and non-life insurance segments as GOI is reported have been actively considering to increase the FDIs participation up to 49 per cent.

I.

Product based classification

(a) Stand-alone Insurance Products

In this case bancassurance involves marketing of the insurance products through either referral arrangement or corporate agency without mixing the insurance products with any of the banks own products/ services. Insurance is

sold as one more item in the menu of products offered to the banks customer, however, the products of banks and insurance will have their respective brands too.

(b) Blend of Insurance with Bank Products

This method aims at blending of insurance products as a value addition while promoting the banks own products. Thus, banks could sell the insurance products without any additional efforts. In most times, giving insurance cover at a nominal premium/ fee or sometimes without explicit premium does act as an added attraction to sell the banks own products, e.g., credit card, housing loans, education loans, etc. Many banks in India, in recent years, has been aggressively marketing credit and debit card business, whereas the cardholders get the insurance cover for a nominal fee or (implicitly included in the annual fee) free from explicit charges/ premium. Similarly the home loans / vehicle loans, etc., have also been packaged with the insurance cover as an additional incentive. III. Bank Referrals There is also another method called 'Bank Referral'. Here the banks do not issue the policies; they only give the database to the insurance companies. The companies issue the policies and pay the commission to them. That is called referral basis. In this method also there is a win-win situation everywhere as the banks get commission, the insurance companies get databases of the customers and the customers get the benefits.

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

Insurers 1 Private

Individual agents 2

Corporate Agents Banks Others 3 4

Brokers Referrals 5 6

Direct Business 7

59.71 16.87 8.92 0.83 7.06 6.61 insurers LIC 98.37 1.25 0.32 0.06 0.00 0.00 Total 85.67 6.38 0.31 0.31 2.32 2.17 New Business (Life) Undertaken under various intermediaries (2005-2006)

Distribution Channels

Traditionally, insurance products were promoted and sold principally through agency systems only. The reliance of insurance industry was totally on the agents. Moreover with the monopoly of public sector insurance companies there was very slow growth in the insurance sector because of lack of competition. The need for innovative distribution channels was not felt because all the companies relied only upon the agents and aggressive marketing of the products was also not done. But with new developments in consumers behaviours, evolution of technology and deregulation, new distribution channels have been developed successfully and rapidly in recent years.

Distribution Channels diagram

Career Agents:

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

Special Advisers:

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

Salaried Agents:

Salaried Agents are an advantage for the bancassurers because they are under the control and supervision of bancassurers. These agents share the mission and objectives of the bancassurers. These are similar to career agents, the only difference is in terms of their remuneration is that they are paid on a salary basis and career agents receive incentive compensation based on their sales.

Bank Employees / Platform Banking:

Platform Bankers are bank employees who spot the leads in the banks and gently suggest the customer to walk over and speak with appropriate representative within the bank. The platform banker may be a teller or a personal loan assistant. A restriction on the effectiveness of bank employees in generating insurance business is that they have a limited target market, i.e. those customers who actually visit the branch during the opening hours.

Corporate Agencies and Brokerage Firms:

There are a number of banks who cooperate with independent agencies or brokerage firms while some other banks have found corporate agencies. The advantage of such arrangements is the availability of specialists needed for complex insurance matters and through these arrangements the customers get good quality of services.

Direct Response:

In this channel no salesperson visits the customer to induce a sale and no face-to-face contact between consumer and seller occurs. The consumer purchases products directly from the bancassurers 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. Bancassurers can feel confident that Internet banking will also prove an efficient vehicle for cross selling of insurance savings and protection products. Functions requiring user input (check ordering, what-if calculations, and credit and account applications) should be immediately added with links to the insurer. Such an arrangement can also provide a vehicle for insurance sales, service and leads.

E-Brokerage:

Banks can open or acquire an e-Brokerage arm and sell insurance products from multiple insurers. The changed legislative climate across the world should help migration of bancassurance in this direction. The advantage of this medium is scale of operation, strong brands, easy distribution and excellent synergy with the internet capabilities.

Outside Lead Generating Techniques:

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

Advantages of Bancassurance

Bancassurance is a means of product diversification and a source of additional fee income for banks. Insurance companies see Bancassurance as a tool for increasing their market penetration and premium turnover. The customer sees Bancassurance as a bonanza in terms of reduced price, high quality product and delivery at doorsteps. Bancassurance if taken in right spirit and implemented properly can be a win-win situation for all the participants viz; banks, insurers and the customers.

Advantages to banks
(A)By selling the insurance product by their own channel the banker can Increase their income. (B) Banks have face-to-face contract with their customers. They can directly ask them to take a policy. And the banks need not to go anywhere for customers. (C) Banks are using different value added services life-E. Banking tele banking, direct mail &so on they can also use all the above-mentioned facility for Bancassurance purpose with customers & non-customers. (D) Productivity of the employees increases. (E) By providing customers with both the services under one roof, they can improve overall customer satisfaction resulting in higher customer retention levels. (F) Increase in return on assets by building fee income through the sale of insurance products. (G) Can leverage on face-to-face contacts and awareness about the financial conditions of customers to sell insurance products.

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

Advantages to Insurers
(A) The Insurance Company can increase their business through the banking distribution channels because the banks have so many customers. (B)Insurers can exploit the banks' wide network of branches for distribution of products. The penetration of banks' branches into the rural areas can be utilized to sell products in those areas. (C)Customer database like customers' financial standing, spending habits, investment and purchase capability can be used to customize products and sell accordingly. (D)Since banks have already established relationship with customers, conversion ratio of leads to sales is likely to be high. Further service aspect can also be tackled easily. (E)The insurance companies can also get access to ATMs and other technology being used by the banks. (F)The selling can be structured properly by selling insurance products through banks. (G) The product can be customized as per the needs of the customers.

Advantages to Consumers

(A) Product innovation and distribution activities are directed towards the satisfaction of needs of the customer. (B) Bancassurance model assists customers in terms of reduction price, diversified product quality in time and at their doorstep service by banks. (C)Comprehensive financial advisory services under one roof. i.e., insurance services along with other financial services such as banking, mutual funds, personal loans etc. (D) Easy access for claims, as banks is a regular visiting place for customers. (E) Innovative and better product ranges and products designed as per the needs of customers. (F)Any new insurance product routed through the bancassurance Channel would be well received by customers. (G) Customers could also get a share in the cost savings in the form of reduced premium rate because of economies of scope, besides getting better financial counseling at single point.

(H) Enhanced convenience on the part of the insured.

SECTION 3-Scenarios

Indian Scenario Global Scenario

INDIAN SCENARIO

Indian Scenario

The business of banking around the globe is changing due to integration of global financial markets, development of new technologies, universalization of banking operations and diversification in non-banking activities. Due to all these movements, the boundaries that have kept various financial services separate from each other have vanished. The coming together of different financial services has provided synergies in operations and development of new concepts. One of these is bancassurance. Bancassurance is a new buzzword in India. It originated in India in the year 2000 when the Government issued notification under Banking Regulation Act which allowed Indian Banks to do insurance distribution. It started picking up after Insurance Regulatory and Development Authority (IRDA) passed a notification in October 2002 on 'Corporate Agency' regulations. As per the concept of Corporate Agency, banks can act as an agent of one life and one non-life insurer. Currently bancassurance accounts for a share of almost 25-30% of the premium income amongst the private players in India. Traditionally, the banks and financial institutions are the key pillars of Indias financial system. Public have immense faith in banks. Share of bank deposits in the total financial assets of households has been steadily rising (presently at about 40%). Indian Banks have constantly proven their capability reach the maximum number of households. In India at present there are total of 65700 branches of commercial banks, each branch serving an average of 15,000 people. Out of these are 32600 branches are catering to the needs of rural India and 14400 to semi-urban branches, where insurance growth has been most buoyant.

(196 exclusive Regional Rural Banks in deep hinterland.) Rural and semi-urban bank accounts constitute close to 60% in terms of number of accounts, indicating the number of potential lives that could be covered by insurance with the frontal involvement of banks.

Reasons for banks entering into insurance business in India

Indian insurance market is a hidden goldmine an estimated Rs. 1, 80,000 crore in terms of annual insurance premium. Sale of insurance through banks will meet an important set of consumer needs. Banks branch network allows face to face contact that is so important in the sale of insurance. Bank channel can also boost sales productivity. Banks are best qualified to sell insurance products. They have a wide distribution reach. Because of the strong ties with the customers they are in a better position to sell insurance products to them. Banks can provide integrated financial services under one roof to their customers. Another main advantage in tapping the banks retail distribution network is cutting the cost of distribution by almost 30%. As some of the studies revealed that 50% of an insurers cost structure is directly or indirectly related to distribution.

 Though insurance companies are good underwriters of risk, they are not to well known for their expertise in investment management. On the other hand, banks are generally perceived to be not good at managing risk but they are perceived to be better at investment management. Bancassurance is about bringing the two attributes together. According to reliable research sources, bancassurance salesman has a much faster learning curve, usually around two years as compared with four and a half years in an insurance company. In that sense, the cost of training is amortized over a shorter period of time and therefore turns-out cheaper. Valid reasons why banks should allow insurance salesman to sell insurance products in their premises: a. Bank gets a royalty or a commission for every insurance policy sold. b. The bank gets an investment management fee for managing the insurers investment. c. Insurance products, like retirement and pension plans, are growth areas for banks. With greater need to downsize - banks can utilize their existing surplus manpower reducing costs and optimum use of infrastructure. Instant access to 60,000 + bank branches including in remote areas. Availability of insurance in rural areas, through cost effective banking channels. As banks are increasingly resorting to alternate delivery channels, surplus space would be available to distribute insurance products.

Policies sold by Indian Insurance players via bancassurance

Company ICICI Prudential SBI Life Birla Sun Life ING Vyasa Life Aviva Life Allianz Bajaj Life Royal Sundaram Allianz HDFC Standard Life MetLife % of policies 15% in 2002, 30% in 2004 15% in 2002, 50% in 2004 25% in 2002, 40% in 2004 10% in 2002 50% in 2002, 70% in 2004 25% in 2003 40% in 2002 10% in 2002, 40% in 2004 25% in 2002

Global Scenario

Bancassurance has seen tremendous acceptance and growth across nations. Although it enjoys a penetration rate in excess of 50% in France, Spain, Italy and Belgium, other countries have opted for more traditional networks. The Life insurance market in the UK is largely in the hands of the brokers. With advent of bancassurance, their market share has increased from 40% in 1992 to 54% in 1999. Sales agents also play an important role on a market entirely regulated by the Financial Services & Markets Act (FSMA) which imposes very strict marketing conditions. In Germany, the market continues to be dominated by general sales agents, even if their market share has declined from 85% in 1992 to 54% in 1999. In Asia, there is a need for financial institutions to be proactive and interact with regulator in order to explore the potential that bancassurance has a complementary distribution channel. Market share per distribution network for insurance products across various countries has been detailed in the below diagram.

Bancassurance business conducted by companies

In several countries in LatinAmerica, banks have benefited from recent reforms financial deregulation, among others by selling insurance products across the counter. An example is the Brazilian market where private pension products are marketed. Bancassurance also took advantage of the large number of national and especially international partnerships which took place in the 1990s. In some countries, bancassurance is still largely prohibited. Even in United States, it was legalized in after much deliberation, when the Glass-Steagall Act was repealed after the passage of the Gramm-Leach-Bliley Act.

Bancassurance in India vs. Bancassurance in Asia & Europe

The following table compares the issues related to bancassurance in India with Europe and Asia (general):

Regulation

Europe Liberalized

Asia (general) Ranging from liberalized to forbidden

India Supportive

Market growth

Bancassuranc e model

Mature markets but pension reforms can spur growth in the life insurance sector Highly integrated models Tax concessions for life insurance premium paid

High growth potential

High growth

Mostly distribution alliances and joint ventures

Distributive

Major drivers

Squeeze on bank Margins. Insurers growing cost pressure and desire to expand distribution capability. Financial deregulation Foreign companies use Bancassurance to enter Asian Markets

Tax free status on maturity Small tax relief on premium. Narrowing bank margin

Squeeze on bank margins

Europe Products Mainly life insurance products to maximize tax benefits Mostly single premium

Asia(general)

India

Mainly life insurance Mainly nonproducts linked to bank unitized services and increasingly, products geared towards managed savings Regular premium

Distribution

Multi-bank

Mainly bank branches

Bank

In several countries in LatinAmerica, banks have benefited from recent reforms financial deregulation, among others by selling insurance products across the counter. An example is the Brazilian market where private pension products are marketed. Bancassurance also took advantage of the large number of national and especially international partnerships which took place in the 1990s. In some countries, bancassurance is still largely prohibited. Even in United States, it was legalized in after much deliberation, when the Glass-Steagall Act was repealed after the passage of the Gramm-Leach-Bliley Act

SECTION 4- Analysis

Survey analysis SWOT analysis

Survey analysis (questionnaire)

A survey was conducted of about 50 people who did regular banking transactions and also had an insurance policy. These included several housewives, businessmen, professionals, students, etc. The following analysis was done on the basis of the survey conducted:

Are you aware of Bancassurance?

No 20% Yes No

Yes 80%

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

that their bank provided bancassurance. They knew with which Insurance Company their bank has tie up with; also they were aware about various policies provided by their banks. However, 20% of the respondents were amused with the term bancassurance and didnt know anything about it and the services provided by their banks.

 Have You Taken An Insurance Policy From Your Bank?

Yes 34%

No
No 66%

Yes

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

The Kind Of Insurance Policy Taken From The Bank:70 60 50 40 30 20 10 0 23% 18% 42% 63%

Deposit Based

Loan Based

Life Insurance

Others

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

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

Reasons For Taking An Insurance Policy:-

90 80 70 60 50 40 30 20 10 0

80%

28%

65%

40%

Security

Savings

Brand Image of Bank

Brand Image of Insurance

Interpretation: There was a mixed response from the customers. 80% said that
they took the insurance policy because of security benefits. 65% said that since, they trusted their bank, they took the policy. There was 40% who said that the brand image of the company also mattered. Only 28% said that savings was a reason that encouraged them to buy insurance policy.

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

Insurance Companies 20%

Banks 23%

Brokers 7% Agents 50%

Interpretation: 50% people preferred agents because they provide personalized

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

 Which Bank Do You Feel Would Excel In Bancassurance? Rate Them Accordingly

100 90 80 70 60 50 40 30 20 10 0

90% 70%

38%

Public Sector Banks

Private Sector Banks

Foreign Banks

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

 Do You Think Bancassurance Has A Good Future?

No, 5%

Yes No

Yes, 95%

Interpretation: 95% people said that they believe that Bancassurance has a
very bright future because there is an immense potential for the insurance industry in India. But 7% believe that because of the emergence of the new technology such as ATMs, Internet banking etc the banks will soon go virtual so there is not much scope for it.

SWOT Analysis:

Banking and Insurance are very different businesses. Banks have less risk but the insurance has a greater risk. Even though, banks and insurance companies in India are yet to exchange their wedding rings, Bancassurance as a means of distribution of insurance products is already in force in some form or the other. Banks are selling Personal Accident and Baggage Insurance directly to their Credit Card members as a value addition to their products. Banks can straightaway leverage their existing capabilities in terms of database and face-to face contact to market insurance products to generate some income for themselves, which previously was not thought of. The sale of insurance products can earn banks very significant commissions (particularly for regular premium products). In addition, one of the major strategic gains from implementing bancassurance successfully is the development of a sales culture within the bank. This can be used by the bank to promote traditional banking products and other financial services as well. Bancassurance enables banks and insurance companies to complement each others strengths as well. It is therefore essential to have a SWOT analysis done in the context of bancassurance experiment in India. A SWOT analysis of Bancassurance is given below:

Strengths:

In a country like India of one billion people where sky is the limit there is a vast untapped potential waiting for life insurance products. Our other strength lies in a huge pool of skilled professionals whether it is banks or insurance companies who may be easily relocated for any bancassurance venture. Banks have the credibility established with their constituents because of a variety of services and schemes provided by them. They also enjoy pride of place in the hearts of people because of their long presence and sustained image. Banks also enjoy a wide network of branches, even in the remotest areas that can facilitate taking up the task on a large and massive scale, simultaneously. Banks are very well aware with the psychology of the customers because of their interaction with the customers on regular basis. Because of this the bankers can guess the attitude and diverse needs of the customers and could change the face of insurance distribution to personal life insurance. With the help of banks trained staff, its brand name and the confidence and reliability of people on the banks, the selling of insurance products can be done in a more proper way.

Weaknesses:

In spite of growing emphasis on total branch mechanism and full computerization of bank branches, the rural and semi-urban banks have still to see information technology as an enabler. The IT culture is unfortunately missing completely in all of the future collaborations. The internet connections are also not properly provided to the staff. To undertake the distribution of the insurance products, the bank employees have to undergo certain minimum period of training, followed by a test and then get them licensed. Moreover the standards of the examination have been raised in the recent past making it difficult for many examinees to clear the same. There is lack of personalized services because the traditional insurance agent is considered a member of the family and hence is able to render a personalized service during and after the sales process. However that may not be the case in regards to a bank employee. There are many differences in the way of thinking and business approaches of bankers and the managers of insurance companies. Banks are traditionally demand-driven organizations with a reactive selling philosophy. Insurance organizations are usually need-driven and have an aggressive selling philosophy.

Opportunities:

There is a vast untapped potential waiting to be mined particularly for life insurance products. There are more than 900 million lives waiting to be given a life cover (total number of individual life policies sold in 1998-99 was just 91.73 million). There are many people in many areas that are still unaware about the insurance and its various products and are waiting that somebody should come and give them the information about it. In urban and metro areas, where the customers are willing to get many services like lockers and safe deposit systems and other products and services from banks, there is a good opportunity to market many property related general insurance policies like fire insurance, burglary insurance and medi-claim insurance etc. Banks' database is enormous even though the goodwill may not be the same. This database has to be dissected and various homogeneous groups are to be churned out in order to position the Bancassurance products. With a good IT infrastructure, this can really do wonders.

Threats:

Success of a Bancassurance venture requires change in approach, thinking and work culture on the part of everybody involved. The work force at every level are so well entrenched in their classical way of working that there is a definite threat of resistance to any change that Bancassurance may set in. Any relocation to a new company or subsidiary or change from one work to a different kind of work will not be easily acceptable by the employees.

Another possible threat may come from non-response from the targeted customers. If many joint ventures took place between banks and insurance companies then it may happen that the customers may not respond to such ventures as happened in U.S. Insurance in India is perceived more as a saving option than providing risk cover. So this may create an adverse feeling in the minds of the bankers that such products may lessen the sales of regular bank saving products. Also selling of investment and good return products may affect the FD Portfolio of the banks. If no strict norms are there for such ventures then many unholy ventures may take place which may give rise to tough competition between bancassurers resulting in lower prices and the Bancassurance venture may never break because of such situations.

SECTION 5- Bancassurance Trends and Opportunities

TRENDS CHALLENGES

Bancassurance: Emerging Trends & Challenges Trends

Though bancassurance has traditionally targeted the mass market, but bancassurers have begun to finely segment the market, which has resulted in tailor-made products for each segment. Some bancassurers are also beginning to focus exclusively on distribution. In some markets, face-to-face contact is preferred, which tends to favour bancassurance development. Nevertheless, banks are starting to embrace direct marketing and Internet banking as tools to distribute insurance products. New and emerging channels are becoming increasingly competitive, due to the tangible cost benefits embedded in product pricing or through the appeal of convenience and innovation. Bancassurance proper is still evolving in Asia and this is still in infancy in India and it is too early to assess the exact position. However, a quick survey revealed that a large number of banks cutting across public and private and including foreign banks have made use of the bancassurance channel in one form or the other in India. Banks even offer space in their own premises to accommodate the insurance staff for selling the insurance products or giving access to their clients database for the use of the insurance companies.

Challenges

Banks could be more enduring than individual agents when selling insurance, but bancassurance relationships are not. Since the opening up of the insurance sector in 00, as many as six bancassurance alliances have ended in divorce says Economic Times. If bancassurance was termed as marriage between banks and insurance, then the probability of divorces cant be ruled out. Critics opine that bancassurance is a controversial idea, and it gives banks too great a control over the financial industry. The challenge to sustain such alliances could be immensely daunting. The difference in regulation, not only across countries but between banks and insurance industry as well has been cited as the primary reason. The difference in trade customs, work culture in these industries is another impediment

Sales front:
Bank employees are traditionally low on

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

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

Public and private divide:

Private sector insurance firms are finding change management in the public sector a major challenge. State-owned banks get a new chairman, often from another bank, almost every two years, resulting in the distribution strategy undergoing a complete change. In the private sector, the M&A activity is one of the causes for change. In the past, Dena Bank, which had originally partnered Kotak Mahindra Life, switched loyalty to the public sector Life Insurance Corporation? So did Allahabad Bank, which had a tie-up with ICICI Prudential Life Insurance. Punjab National Bank and Vijaya Bank have been forced to drop their bancassurance partnerships after they chose to set up an insurance broking JV.

Group companies dilemma:

The other conflict that most insurers face is when they have a bank within their own group. Half of the insurance firms in India are part of a financial group that has a bank. They include ICICI Bank, State Bank of India, ING Vysya, HDFC, Jammu & Kashmir Bank, and Kotak Mahindra Bank. According to Rajesh Relhan,

head of bancassurance, Aviva Life, there is a fear among banks that at some point in future their insurance partner may end up cross-selling banking services to their policyholders. Besides, companies that sells predominantly through agents experience channel conflict when both agents and banks target the same customer.

Operational Challenges:
The developments in the 21st century, particularly due to increase in non-life insurance products pose further problems to the bancassurance alliances:

The shift away from manufacturing to pure distribution requires banks to better align the incentives of different suppliers with their own. Increasing sales of non-life products, to the extent those risks are retained by the banks, require sophisticated products and risk management. The sale of non-life products should be weighed against the higher cost of servicing those policies.

Banks will have to be prepared for possible disruptions to client relations arising from more frequent non-life insurance claims

SECTION 6- OUTLOOK OF BANCASSURANCE

Factors for the success of Bancassurance Future scope for Bancassurance Findings Recommendations

Factors for the success of Bancassurance

The decision Mining database The banks culture Bank customer relationship Lower cost of distribution due to higher sales productivity

Life insurance products based on the insurers desires (sales driven)

The existing bank branch network/infrastructure

Information Technology

Banks and insurance companies are very different in both value and culture. In India, the selling of insurance through banks is yet to emerge as regular activity and, therefore using traditional products and systems may not be appropriate. The bitter experience of banks in Bancassurance even with innovative products in the previous year was mainly due to poor marketing, poor publicity, monthly payments during time of inflation and declining value of money, lack of product promotion initiated by the branch staff to avoid manual strain in mobilizing and maintaining accounts for Bancassurance products under different heads and conventional way of dealing with customer in explaining the merits of taking Bancassurance products. Fundamental to Bancassurance is the convenience and accessibility to the customer.

Lower cost of distribution due to higher sales productivity

The potential to be tapped is ample and increasing the clientele base for the insurance products will reduce the cost of distribution. Banks can leverage their strengths to develop additional mass.

Mining database
Banks have huge database of clients. Bank should ensure relevant and flexible database systems.

Bank customer relationship

Dealing with high net worth customers may require insurance specialists to address complex sale issues. Bank officials need to be very clear about service standards, policy issues, processing issues and sales and marketing supports.

 The existing bank branch network/infrastructure

Branch network should be utilized in with more ambiances for selling insurance products. The costs of infrastructure can be defrayed over a larger products and services.

Life insurance products based on the insurers desires (sales driven)

Rather than the consumers needs market oriented, in rural and semi-urban areas also, similar policies can be canvassed for sale. However, in these branches, the bank should be proactive and innovative in suggest a proper planning for the payment of premiums.

Information Technology
The banks are technology- savvy now and competing with each other on the service front. The technology up gradation can ensure more effective utilization of the synergies the banks posses in Bancassurance. Banks should train and equipped their staff with the backing of technology, to deliver the requirements, Utilization of ATMs and debit cards as payments mechanism.

The banks culture

Banks culture must be transformed to sell insurance and it must be ensured that shelf space is adequately provided in a banks retail delivery systems. It is important to note though, that if the banks culture is not compatible with selling insurance, then specialist insurance salesman may be needed.

 The decision
On what types of Insurance products to be sold and methods of distribution of these products are symbiotically related. The effort and expertise required to sell a product must be in consonance with skills available and cost base of the chosen distribution method.

The success of the banking products is the function of the increasing strength of the service/ products plus the stages of economic development at which society living. Similar is the way with Bancassurance as banking product. India, as a future economic giant in the world economy will not lag behind in supporting Bancassurance. Indian banks are known for their innovation and the various products and services which surfaced, disappeared and later surfaced in a new avatar will certainly do well for the banking system.

Future scope for Bancassurance

By now, it has become clear that as economy grows it not only demands stronger and vibrant financial sector but also necessitates providing with more sophisticated and variety of financial and banking products and services. The outlook for bancassurance remains positive. While development in individual markets will continue to depend heavily on each countrys regulatory and business environment, bancassurers could profit from the tendency of governments to privatize health care and pension liabilities. India has already more than 200 million middle class population coupled with vast banking network with largest depositors base, there is greater scope for use of bancassurance. In emerging markets, new entrants have successfully employed bancassurance to compete with incumbent companies. Given the current relatively low bancassurance penetration in emerging markets, bancassurance will likely see further significant development in the coming years. In India the bancassurance model is still in its nascent stages, but the tremendous growth and acceptability in the last three years reflects green pasture in future. The deregulation of the insurance sector in India has resulted in a phase where innovative distribution channels are being explored. In this phase, bancassurance has simply outshined other alternate channels of distribution with a share of almost 25-30% of the premium income amongst the private players. To be fruitful, it is vital for bancassurance to ensure that banks remain fully committed to promoting and distributing insurance products. This commitment has to come from both senior management in terms of strategic inputs and the operations staff who would provide the front-end for these products. In India, the signs of initial success are already there despite the fact that it is a completely new phenomenon. There is no doubt that banks are set to become a significant distributor of insurance related products and services in the years to come.

Findings
Although the concept is simple enough in theory, but in practice it has been found to be far from straightforward. Almost many people have a fair idea about Bancassurance and that their banks sell various insurance products. But still few people dont know about Bancassurance as a concept. It has been also found out that the banks have various opportunities to cross sell insurance products. The insurance companies also have the opportunity to take advantage of the banks network and other avenues. It is also seen that customers have a lot of trust on the banks, and because of that trust the customers will take the insurance products from banks. As the brand name of the banks is important so is the brand image of the insurance companies. So the banks and the insurance companies must tie-up with the right partners. This will help them to create a better image in the minds of the customers. It has also clear from the study that the private sector and the foreign banks have better future in Bancassurance. But the public sector banks are also trying to give them a tough competition e.g. SBI Life Insurance Co. The insurance business can go a long way because there is a large population who is still unaware about insurance. So the insurance companies have a huge potential market in the years to come. The banks fail to provide personalized services as are provided by the agents. So banks will have to improve in that area. They should provide after sales services to the customers.

Recommendations
The Insurance companies need to design products specifically for distributing through banks. Trying to sell traditional products may not work so effectively. The employees of the banks who are selling insurance products must be given proper training so that they can answer to any queries of the customers and can provide them products according to their needs. Banks should also provide after sales services and they should be more aggressive in selling the insurance products. Banks should also do the settlement of claims which will increase the trust and reliability of the customers on the banks. In India, since the majority of the banking sector is in public sector which has been widely responsible for the lethargic attitude and poor quality of customer service, it needs to rebuild the blemished image. Else, the bancassurance would be difficult to succeed in these banks. A formal and standard agreement between these banks and the insurance companies should be taken up and drafted by a national regulatory body. These agreements must have necessary clauses of revenue sharing. In case of possible conflicts, the bank management and the management of the insurance company should be able to resolve conflicts arising in future. For bancassurance to succeed, products and processes will need to be tailored to bank markets, rather than adjusted to insurers specifications. Banks and Insurance companies should apply all the skills and potential in this area and take advantage of the same and they should improve the products from time to time according to the needs of the customers.

SECTION 7- Case Study

Bank of India HDFC (Standard Life Insurance)

BANCASSURANC E

BANK OF India

Bank of India was founded on 7th September, 1906 by a group of eminent businessmen in Mumbai (previously known as Bombay), India. Prudence and high standard of customer service has been the corner stones of the Bank's growth during these 102 years. Today, the Bank ranks as a premier bank with over 2865 branches in India and 25 foreign branches/offices with an asset base of more than USD 32 Billion as on 31st March 2007. Corporate credit, export finance, forex and care for customer have created strong brand equity for Bank of India. The Bank entered into bancassurance tie up with ICICI Prudential Life Insurance Co Ltd, for selling life insurance products in December2001. The number of branches engaged in selling life insurance products was gradually increased from 595 to 710. Various initiatives were undertaken for giving thrust to this business, like identifying Marketing Managers exclusively for Insurance business in high potential areas. This has resulted in increase in volume of business and referral commission by 90% over the previous year. The Bank has signed agreement for tie-up with National Insurance Co Ltd (NICL) for selling their Non-life insurance products on referral basis. All branches in 47 Zones, as against 29 major Zones last year, have been authorized to undertake referral business. 53 major branches were identified across the country where NICL agreed to open their Extension Counters for giving thrust to insurance business. Due focus was also given through efforts by their Zones / branches and Marketing Managers. This has resulted in increased business and referral commission.

The Bank is into Bancassurance business since December 2001 and they are into tie up to undertake insurance business of behalf of ICICI Prudential Life Insurance Co Ltd for selling life insurance products & National Insurance Co Ltd. for non-life insurance products.

According to them the Bancassurance business have definitely proved to be an advantage to the banking industry because it helps the bank in generating additional income thereby providing them with an edge over their competitors and improving their profit position. For purpose of entering into bancassurance business the bank used 2 channels: One partys distribution channel gained access to the client base of other party.

Through a joint venture with ICICI Prudential Life Insurance Co Ltd & National Insurance Co Ltd

The reasons that made the bank take up this business include competitive pressures, high operating cost, shift in the attitude of the people to invest into insurance business for tax benefits, earning additional income (fee based). The distribution channels undertaken by the bank for distributing the insurance products include: Employment of salaried agents to promote and sell products. Bank employees themselves undertake the business of promoting and selling products. The Bank has also received IRDA stipulated training for insurance agents; advisors so as to make them familiar with the insurance regulations and

product information, so that they can source the insurance plans to the right customer. As far as the bank employees who are involved in the selling of insurance products are concerned, a dedicated team of employees from Bank of India are employed in the branch to guide them and resolve various issues. As the concept of bancassurance is new, the Bank in order to educate the Bank customers and make them aware, use various techniques: Display material. Through direct interaction with customers. Through Bank employees. According to the Bank, people prefer buying insurance products from the Bank and there are no target customers as such. There are different plans for different target audience; which depends on the type of policy that is being promoted & sold. Some of types of Non-Monetary incentives that the Bank provides to agents/ employees for doing well include: Rewards/Recognition. Dinner/ Lunch with zonal & senior managers. Vacations (count station) with family. Internal competition. As the number of activities of a Bank increases, the number of frauds and unwanted manipulation also increases. To curb these HDFC Standard Life undertake the following measures:

 Proper and timely audit. Regular training for the employees in the organization is undertaken.

Ban k

Insura nce

SECTION 8 CONCLUSION BIBLIOGRAPHY WEBLIOGRAPHY

Conclusion

The life Insurance Industry in India has been progressing at a rapid growth since opening up of the sector. The size of country, a diverse set of people combined with problems of connectivity in rural areas, makes insurance selling in India a very difficult task. Life Insurance Companies require good distribution strength and tremendous man power to reach out such a huge customer base. The concept of Bancassurance in India is still in its nascent stage, but the tremendous growth and the potential reflects a very bright future for bancassurance in India. With the coming up of various products and services tailored as per the customers needs there is every reason to be optimistic that bancassurance in India will play a long inning. But the proper implementation of bancassurance is still facing so many hurdles because of poor manpower management, lack of call centers, and no personal contact with customers, inadequate incentives to agents and unfulfillment of other essential requirements. I have experienced a lot during the preparation of the project. I had just a simple idea about Bancassurance. But after a detailed research in this topic I have found how important bancassurance can be for bankers, insurers as well as the customers. I am contented that all my objectives have been met to its fullest. I have also experienced that though Bancassurance is not being utilized to its fullest but it surely has a bright future ahead. India is at the threshold of a significant change in the way insurance is perceived in the country. Bancassurance will definitely play a defining role as an alternative distribution channel and will change the way insurance is sold in India.

Stage of Polarization: Most banks have short term agreements; a stage of realignments may occur Emergence of winners Strong alignments with banks with cross investments and exclusivity. Broking arrangements Short Term 2005-06 Medium term 2006-09 Long term 2010 onwards

Some Banks yet to firm up partnerships Insurers partnered with select banks under Corp Agency

Change in regulations could impact current arrangements

The figure above shows the marriage of the two- banks and insurance companies seems to be successful till today & their relationships will be firmed to bond together, thus, according to me; they can make a good couple in the years to come. The bridge has been reached and many are beginning to walk those cautious steps across it. Bancassurance in India has just taken a flying start. It has a long way to go .. After all The SKY IS THE LIMIT!

Bibliography

Webliography

www.google.com www.rbi.org.in www.askjeeves.com www.wikiepedia.com www.insuranceforum.com

Ban k

Insurance