- bancassurance

8/4/2019 - BANCASSURANCE

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BANKING INOVATIONS ANDBANKING INOVATIONS AND

VALUE ADDED SERVICESVALUE ADDED SERVICES --

BANCASSURANCEBANCASSURANCE

Jesena . AJesena . AResearch scholarResearch scholar

Dr. GRD college , coimbatoreDr. GRD college , coimbatore


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INTRODUCTIONINTRODUCTION

Innovation is a baby child of three thingsInnovation is a baby child of three things-- freefreethought, work pressure and necessitythought, work pressure and necessity

Worlds banking system is changing or in otherWorlds banking system is changing or in other

words upgrading every quarter with variouswords upgrading every quarter with variousinnovative schemes, policies.innovative schemes, policies.

The coming together of different financialThe coming together of different financialservices has provided synergies in operationsservices has provided synergies in operations

and development of new concepts. One of theseand development of new concepts. One of theseis bancassurance.is bancassurance.


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BANCASSURANCEBANCASSURANCE

The Bancassurance is the distribution ofThe Bancassurance is the distribution ofinsurance products through the bank'sinsurance products through the bank's

distribution channels.It is a phenomenondistribution channels.

It is a phenomenonwhere in insurance products are offeredwhere in insurance products are offered

through the distribution channels of thethrough the distribution channels of thebanking services along with a completebanking services along with a complete

range of banking & investment products &range of banking & investment products &services.services.


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Bancassurance in India:Bancassurance in India:

bancassurance is a new buzzword inbancassurance is a new buzzword inIndia. It originated in India in the yearIndia. It originated in India in the year

2000 when the Government issued2000 when the Government issuednotification under Banking Regulation Actnotification under Banking Regulation Actwhich allowed Indian Banks to dowhich allowed Indian Banks to doinsurance distributioninsurance distribution


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Utilities of Bancassurance:Utilities of Bancassurance:

1.1. For Banks:For Banks:

1.1. As a source of fee based incomeAs a source of fee based income

2.2. Product diversificationProduct diversification

3.3. Building close relations with the customersBuilding close relations with the customers

2.2. For Insurance Companies Stiff competitionFor Insurance Companies Stiff competition

1.1. High cost of agentsHigh cost of agents

2.2.

Rural penetrationRural penetration3.3. MultiMulti--channel distributionchannel distribution

4.4. Targeting middle income customersTargeting middle income customers


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Potential Distribution Strategy

Distribution Through An Intermediary Distribution Done Directly

Personal Intermediary Seller Initiated

Tied Career Agent Mail

Salaried Representative Telemarketing

Broker/Independent Agent Policy Owner Initiatives

Financial Service Professional Worksite Or Affinity Marketing

Bancassurance (European Model)

Institution/Business Intermediary Buyer Initiated

Financial Organization ( Telephone Response

Affinity Group Internet Response

Sponsored / Worksite Marketing


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Strengths:Strengths:

a vast untapped potential waiting for lifea vast untapped potential waiting for lifeinsurance productsinsurance products

huge pool of skilled professionalshuge pool of skilled professionals

Banks have the credibility established with theirBanks have the credibility established with their

constituentsconstituents wide network of brancheswide network of branches

People rely more upon LIC and GICPeople rely more upon LIC and GIC

the selling of insurance products can be done inthe selling of insurance products can be done in

a more proper way.a more proper way. create an added advantage for both banks andcreate an added advantage for both banks and

insurers.insurers.


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WeaknessesWeaknesses::

the rural and semithe rural and semi--urban banks have stillurban banks have stillto see information technology as anto see information technology as anenabler.enabler.

the bank employees have to undergothe bank employees have to undergo

certain minimum period of training,certain minimum period of training,followed by a test and then getfollowed by a test and then getthemselves licensed.themselves licensed.

lack of personalized services because thelack of personalized services because thetraditional insurance agenttraditional insurance agent

Banks are traditionally demandBanks are traditionally demand--drivendriven


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Insurance organizations are usually needInsurance organizations are usually need--drivendriven

, the visits in urban or metro branches are, the visits in urban or metro branches aregoing to be fewer because of ATMs andgoing to be fewer because of ATMs andee--banking.banking.

is the inflexibility of the products i.e. itis the inflexibility of the products i.e. itcannot be tailor madecannot be tailor made


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Opportunities:Opportunities:

vast untapped potential waiting to be minedvast untapped potential waiting to be minedparticularly for life insurance productsparticularly for life insurance products

many people in many areas that are stillmany people in many areas that are stillunaware about the insurance and its variousunaware about the insurance and its various

productsproducts opportunity to market many property relatedopportunity to market many property related

general insurance policies like fire insurance,general insurance policies like fire insurance,burglary insurance and mediburglary insurance and medi--claim insuranceclaim insuranceetc.etc.

Banks' database is enormousBanks' database is enormous

take advantage of this by crosstake advantage of this by cross--selling theselling theinsurance products and combine it as a package.insurance products and combine it as a package.


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Threats:Threats:

Success of a Bancassurance venture requiresSuccess of a Bancassurance venture requireschange in approach, thinking and work culturechange in approach, thinking and work culture

nonnon--response from the targeted customers.response from the targeted customers.

problem ofReputational Contagion i.e. loss ofproblem ofReputational Contagion i.e. loss of

market confidence towards one in a venturemarket confidence towards one in a ventureleading to loss of confidence on the otherleading to loss of confidence on the otherbecause of identical brand recognition,because of identical brand recognition,

most common obstacles to success ofmost common obstacles to success ofBancassurance are poor manpowerBancassurance are poor manpowermanagement, lack of a sales culture within themanagement, lack of a sales culture within thebank,bank,


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Bancassurance business conducted by companies

Company

% of policies

ICICI Prudential 15% in 2002, 30% in 2004

SBI Life 15% in 2002, 50% in 2004

Aviva Life 50% in 2002, 70% in 2004

Allianz Bajaj Life 25% in 2003

Royal SundaramAllianz 40% in 2002

HDFC Standard Life 10% in 2002, 40% in 2004

MetLife 25% in 2002

Source: Newspaper reports, various dates.


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Bancassurance Arrangement Of The Indian Insurance Companies

Insurance Companies

Bancassurance Partner

Allianz Bajaj Standard Chartered Bank

Birla Sun Life Citibank

Dabur CGU Canara Bank, Lakshmi Vilas Balkan ABN Amro Bank

And American Express Bank

HDFC Standard Life Union Bank/Indian Bank

ICICI Prudential Life ICICI Bank

ING Vysya Life Vysya Bank

LIC Corporation Bank, Oriental Bank Of Commerce, Indian

Overseas Bank

Met Life J&K Bank

SBI Cardiff Life Insurance Sbi

Tata AIG Life Insurance Citibank


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FINDINGS:FINDINGS:The analysis of one of the studies conductedThe analysis of one of the studies conducted

among 75 top insurance executives presentedamong 75 top insurance executives presentedthe following factsthe following facts

55% said the internet will be an effective55% said the internet will be an effective

distribution as a supplier of informationdistribution as a supplier of informationthan as a tool to close salesthan as a tool to close sales

8% said the internet will become a useful8% said the internet will become a useful

sales channel in 3 to 5 yearssales channel in 3 to 5 years 50% rely little or not at all on bank sales50% rely little or not at all on bank sales


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67% commented banks are currently not that67% commented banks are currently not that

effective but in 3 to 5 years forecast theseeffective but in 3 to 5 years forecast theseopinion holders percentage comes to only 9%opinion holders percentage comes to only 9%

69% expect that in 3 to 5 years bancassurance69% expect that in 3 to 5 years bancassurancewill be a major trendwill be a major trend

Match of distribution to existing products andMatch of distribution to existing products andcustomers, including crosscustomers, including cross--sellingselling

Implications of current distribution cost,Implications of current distribution cost,

competitiveness and new product designcompetitiveness and new product design


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