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he bancassurance model will remain one of the popular models for insurance sector

for at least another decade, feels Kamalji Sahay, chief executive officer, Star Union Dai-ichi Life Insurance Company, maintaining that the model is extremely efficient and very cost effective.

“Yes, we can entirely depend on this model and we do not intend to have our own distribution channel for the time being, says Sahay, who heads the joint venture insurance company st up by Bank of India and Union Bank of India and Japanese insurance major Dai-ichi Mutual Life Insurance Company.”

“I am saying so after doing a lot of due diligence. In our case, the cost of operations for the half-year has been just 64% of the premium collection, where as this is much higher in the case of insurance companies which depend on their own channels. The captive network of the banks can be very effectively made use of by insurance companies opting for this distribution model. There are no hassles of overheads, establishing offices and looking out for customer data,” he adds.

However, the model is likely to reach a plateau in about 10 years when insurance companies like his will have to think of creating other distribution models, says Sahay. He also adds that bancassurance is one of the models by the insurance regulator and there are no constraints placed on insurance companies opting for this model. It is poised to be one of the preferred distribution channels for insurance operators, he says.

While opting for this model, the insurance companies do have access to the customer database of the banks, which is a major fillip, besides the facility to integrate the transaction system with that of the banks. “Today,

we have access to the database of our promoter banks and the premium collections effected at the bank branches are directly credited to our account in a seamless manner. The customer base of the two banks - more than 48 million - provides great scope for us to cross sell our products. Additionally, the regional rural banks sponsored by the two banks provide more than 1,400 branches to tap the life insurance business in the rural areas,” says Sahay vouching for the bancassurance model.

QUITE ON TARGETThe insurer, which received its license in

December 2008, has seen its premium income reach Rs 250 crore at the end of the third quarter in December 2009. Says Sahay: “We had a very ambitious target for the first year, that is Rs 400 crore by the end of financial year 2009-2010, and in all likelihood, we will be crossing Rs 500 crore mark by this time frame, because the last quarter is always the most productive quarter.”

The company has a pan India footprint. Sahay says he could do very good business in some of the backward areas in north India and in cities and towns like Gorakhpur, Varanasi, Dhanbad, Bokaro and Ranchi. “We have been able to make determined foray into the rural areas just because of the bancassurance model because the banks had their branches in these areas. ULIP and endowment products were in high demand in these areas,” he elaborates.

Technology induction is very high on the priority list of the company. It is ahead of many of its peers, according to Sahay. “We have already implemented a core insurance system - LifeAsia - which is partly integrated with the systems of our promoter banks, especially the customer database. Of the 23 private insurance companies, only eight have deployed technology in a big way and automated their processes. We have done it in the very first year of our operations.”

CUSTOMER PORTALThe company has already set up a customer portal

and customers can connect to the system by logging on to the portal 24x7 and can find policy data, fund

Kamalji Sahay,

CEO, Star

Union Dai-ichi

Life Insurance

Company,

swears by the

bancassurance

model. This is

one model that

helps insurance

companies, he

tells executive

editor N. Mohan

in an interview.

A report:

Bancassurance - an Effective Distribution Model

Kamalji Sahay says an insurance company can entirely depend on bancassurance model

T

KSahay Jan 10.indd 2 1/12/2010 4:03:58 PM

details, premium due details with facility to print premium receipts, change address, etc, on real time basis. It is now in the process of enabling its customers to make online payment of premiums.

Besides, there is going to be an employee portal and a distribution portal. Along with these initiatives the company has also launched automated SMS alerts, e-mail alerts and a full fledged contact centre for its customers as a part of its communication strategy.

REVERSE MORTGAGEStar Union Dai-ichi Life Insurance

has been in the limelight recently when it tied up with Central Bank of India to launch a unique reverse mortgage plan, which Sahay says, enables a person to enjoy his retirement with dignity. “I must tell you something about this innovative reverse mortgage product specially suited to Indian cultural values and ethos. The Sud Life Reverse Mortgage Loan- Annuity Plan aims to provide financial security to senior citizens who have assets but not enough liquidity to lead a life with dignity. Senior citizens can approach Central Bank of India, which is a partner bank of ours, to avail a reverse mortgage loan against their existing property. The bank will act as a master policy holder and buy for the senior citizens a life annuity from us. The senior citizens do not have to repay this loan and in case the legal heirs wish to retain the property all they need to do is to repay the loan amount to the bank with the accrued interest on it. The Reverse Mortgage Loan- Annuity can be paid in yearly, half-yearly, quarterly or monthly installments. There are two options under the plan. Through the first option, the senior citizens can receive the stated annuity throughout their life time and no amount will be refunded thereafter. Through the second option, senior citizens will receive comparatively

lower annuity, which will be adequately compensated for by the return of the original purchase price to the banks or their legal heirs thereafter as the case may be. The annuity installments depend on the purchase price, age of the annuitant and the option selected.”

NEW PRODUCTSThe company recently came out with

a slew of products to add to its existing bouquet of products cater to the specific needs of the various segments. Three of these are under group plan - SUD Life Group Leave Encashment Plan, SUD Life Group Gratuity Scheme and the SUD Life Reverse Mortgage Loan - Annuity Plan. The three individual plans are SUD Life Instant Endowment Plan, SUD Life Pure Term Plan and SUD Life Premier Protection Plan.

Its existing products - Dhan Suraksha ULIP and Dhan Suraksha Premium ULIP, under unit linked life insurance plans, Prabhat Tata under unit linked child benefit plan, Immediate Annuity Plan and Dhruv Tara unit linked pension plan under pension plans, and Jeevan Safar endowment + whole life plan, Instant Endowment Plan and Pure Term Assurance Plan under traditional life insurance plans have been attractive schemes, which received good response and helped the company to achieve a record of sorts in premium collection in the first year of its operations.

Sahay, a veteran of the Indian life insurance sector, says the insurance sector in India has a huge potential. “We are totally geared to meet the requirements of the prospective customers. I am of the view that most of the banks will now enter this segment through partnerships, in the case of public sector banks through a workable public private partnership model, like ours,” he adds.

mohan@bankingfrontiers.com

This is Our Life Rajneesh Kapoor

B A N K I N G F R O N T I E R S J A N U A R Y 2 0 1 0 15

3 The Asian Development Bank has signed a new trade financing agreement with Bank of Ceylon to provide essential finance to Sri Lanka’s exporters and importers. The program, called Trade Financing Facility Program, also helps banks to develop relationships with international peers, which promotes partnership and knowledge sharing in the future. ADB already has similar agreements with DFCC Vardhana Bank and NDB.

3 Commercial Bank of Ceylon has launched its global credit card in Bangladesh. There are two types of cards called ‘Combank Global Gold Card’ and ‘Combank Global Classic Card’.

3 Central Bank of Sri Lanka is setting up an export-import bank to fast-track Sri Lanka’s international trade, governor Nivard Cabraal said. The proposed exim bank will have an initial capital of Lankan Rs 200 million rupees and may be financed by both government and commercial sources.

3 DFCC Vardhana Bank, the everyday banking unit of DFCC Bank, has joined forces with Sampath Bank to offer extensively enhanced ATM network facilities with wider location coverage in the island. The proposed network comprises over 212 ATM points spread across the island.

3 The People’s Bank, Bank of Ceylon, National Savings Bank and the State Mortgage and Investment Bank will be participating in housing loan scheme for government servants to recognize their contribution to nation building. The applicable interest rate varies between 4% - 11%, depending on the size of the loan. Lankan Rs 5000 million has been allocated to enhance the loan scheme.

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