bancassurance: emerging trends, opportunities and challenges According to a recent sigma study, bancassurance is on the rise,particularly in emerging markets.

Worldwide, insurers have beensuccessfully leveraging bancassurance to gain a foothold in marketswith low insurance penetration and a limited variety of distributionchannels.Bancassurance, the provision of insurance services by banks, is anestablished and growing channel for insurance distribution, though itspenetration varies across different markets. Europe has the highestbancassurance penetration rate. In contrast, penetration is lower inNorth 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 socialand cultural factors, as well as regulatory considerations and productcomplexity, play a significant role in determining how successfulbancassurance is in a particular market. The outlook for bancassurance remains positive. While development inindividual markets will continue to depend heavily on each countrysregulatory and business environment, bancassurers could profit fromthe tendency of governments to privatise health care and pensionliabilities. In emerging markets, new entrants have successfullyemployed bancassurance to compete with incumbent companies.Given the current relatively low bancassurance penetration inemerging markets, bancassurance will likely see further significantdevelopment in the coming years.Emerging Trends Though bancassurance has traditionally targeted the mass market,bancassurers have begun to finely segment the market, which hasresulted in tailor-made products for each segment. The quest foradditional growth and the desire to market to specific client segmentshas in turn led some bancassurers to shift away from using astandardised, single channel sales approach to adopting a multiplechannel distribution strategy. Some bancassurers are also beginning tofocus exclusively on distribution.In some markets, face-toface contact is preferred, which tends tofavour bancassurance development. Nevertheless, banks are startingto embrace direct marketing and Internet banking as tools to distributeinsurance products. New and emerging channels are becomingincreasingly competitive, due to the tangible cost benefits embeddedin product pricing or through the appeal of convenience andinnovation.Finally, the marketing of more complex products has also gainedground in some countries, alongside a more dedicated focus on nicheclient segments and the distribution of non-life products. The drive forproduct diversification arises as bancassurers

realise that over-relianceon certain products may lead to undue volatility in business income.Nevertheless, bancassurers have shown a willingness to expand theirproduct range to include products beyond those related to bankproducts.Strategic Challenges These developments are expected to challenge traditionalbancassurers in the following ways: The shift away from manufacturing to pure distribution requires banksto better align the incentives of different suppliers with their own.Increasing sales of non-life products, to the extent those risks areretained by the banks, require sophisticated products and riskmanagement. The sale of non-life products should be weighted against the highercost of servicing those policies.Banks will have to be prepared for possible disruptions to clientrelations arising from more frequent non-life insurance claims. The twelfth article Bancassurance in India An EmergingConcept , by V V Ravi Kumar highlights the increasing importance of cross-selling in financial services sector. Banks are also inclined toleverage their vast distribution networks to augment their non-interestincome. Bancassurance with its origins in France is also an importantcomponent of such an effort in view of the added thrust on retail. Withonly about a quarter of the insurable population covered underinsurance, insurers see a great potential in bancassurance as it offersthem a readymade distribution platform with a tremendous distributionnetwork. The concept though in its early stages offers immensepotential for the future in India.In the thirteenth article Bancassurance: Challenges andOpportunities in India , Rachana Parihar, the author, brings out asto how bancassurance will be beneficial to banks, insurers andcustomers. The author takes a birds eye view of the global scenario of bancassurance. He studies the distribution channels and the culturalissues involved in distribution and presents the challenges andopportunities of bancassurance in India. This article has a valueaddition Bancassurance Indian Scenario by Sharath Jutur. Theauthor argues that bancassurance in India is still in its nascent stageand has to go a long way overcoming many challenges along the way.In the fourteenth article Training A Critical Component forBancassurance in India , the author Kailash Mishra, discusses thedistribution strategies in bancassurance. The author focuses on theimplementation issue of bancassurance, trainingthe criticalcomponent of bancassurance,

improving sales management, providingsales management, providing training resources, sales culture andmentoring. The author makes out a case for training interventions as anecessary tool for succeeding in bancassurance by means of 3 illustrative caselets. The fifteenth article HR and Operational Challenges inBancassurance An Indian Perspective by V V Ravi Kumarfocuses on the HR and operational issues which need to be addressedon a priority basis to enable the concept of bancassurance to succeed.Foreign Banks, in India, due to their aggressive sales orientation, havebeen able to do a much better job in this field. Training, compensation,shaping behaviour to cross-sell aggressively and becoming multiskilledare some of the HR issues discussed. Banks are required to put theiremployees through a mandatory process of training and licensing.Banks need to evolve a suitable compensation-reward structurerecognizing the individuals contribution rather than a one size fits allapproach. Insurance products are seldom bought and therefore needto be sold aggressively for which Bank employees, highly orientedtowards the counter based selling need to change their mindset. TheBank personnel need to show a willingness to become multi-skilled. The individual agent though not strong in offering need based solutionsis able to interact with the prospects on a continuous basis and istherefore able to offer a better quality of service. Banks need to utilizethe technology based services like ATMs and internet to sustain long-term contracts like insurance. Pre-sales and post sales service, properharnessing of the Banks customer database and leveragingtechnology to provide better service levels are the operational issuesanalyzed.In the European countries, bancassurance has evolved over a period of more than three decades to develop successful business models mostsuited to the local conditions, thereby fitting in the cultural milieu. Inthe United States of America, it has been a limited success withproducts distributed under the concept mainly being restricted toannuities. In Japan, preparations are on to commence a fullfledgedbancassurance model from the year 2007. The Middle East countriesare witnessing birth pangs in this concept though they have immensepotential. In India, bancassurance is in its early stages of evolutionafter a period of three years during which it has had to overcome manya challenge in several fields. The Corporate Agency model and thewrapper model seem to have scored over the referral model in India,though it is rather early to come to a decisive conclusion. The

comingdays promise to be a period of exciting developments in this field, inIndia.