INTRODUCTION TO BANCASSURANCE

BANCASSURANCE as a term itself tells us what does it means. Its a combination of the term Bank and Insurance. It means that insurers have started selling there products through banks. Its a new concept to Indian market but it is very widely used in western and developed countries. It is profitable both to Banks and Insurance companies and has a very bright future to be the most develop and efficient means of distribution of Insurance product in very near future. Insurance company can sell both life and non-life policies through banks. The share of premium collected by banks is increasing in a decent manner from the time it was introduced to the Indian market. In India Bancassurance is guided by Insurance Regulatory and Development Authority Act (IRDA), 1999 and Reserve Bank of India. All banks and insurance company have to meet particular requirement to get into Bancassurance business.

The banking business is also generating more profit by more premium collected by them and they also receive commission like normal insurance agent which increase there profits and better reputation for the banks as there service base also increase and are able to provide more service to customers and even more customer are attracted towards banks. It is even profitable for Insurance Company as they receive more and more sales and higher customer base for the company. And they have to directly deal with an organization which reduce there pressure to deal with each customer, face to face. In all, Bancassurance has proved to be a boom in whole Banking and Insurance arena.

SBI BANCASSURANCE STANDPOINTThough much ado was made about bancassurance, an alternate channel to hawk risk products through banks, the channel is yet to pick up pace as of today. Most of the insurance companies have already tied up with banks to explore the potential of the channel that has been a success story in Europe and legislations are also in place. For insurance companies and banks the convergence brings about benefits for both.

State Bank of India- the largest Bank of India has been into the Bancassurance arena since long. Being aware of the advantages that Bancassurance offers, the bank has tied up with two major insurance players for fulfilling the insurance needs of the bank. The bank offers life insurance products through SBI LIFE INSURANCE COMPANY LTD., and offers General insurance products to its customers through NEW INDIA ASSURANCE COMPANY LTD.

SBI Life Insurance Company a predominant player in bancassurance is positive about the channel bringing about a transformation in the way insurance has been sold so far. The company is banking heavily on bancassurance and plans to explore the potential of State Bank of Indias 10000 plus branches spread across the country and also its 4000 plus associate banks - one of the reasons why SBI Life Insurance is not laying much emphasis on increasing its agent force. The company has appointed Certified Insurance Facilitators (CIFs) in a phased manner at its branches. For now around 320 CIFs, one from each of its bank branches have been identified for the purpose in addition to setting up insurance counters at its banking outlets. The number is expected to go up to 500. The company aimed at acquiring 75 percent of the total business through bancassurance and the balance through the other channels by 2007.

Coming towards SBIs General Insurance Business, State Bank of India, the country's largest Bank and New India Assurance Co. Ltd, India's largest non- life insurance company have tied up for distributing general insurance policies of New India through SBI's branch network.

For New India a tie up with SBI, the country's largest bank with a 10000 strong branch network is a major boost. The tie up between the two largest players in their respective fields has enabled SBI to leverage its unmatched branch network and customer base to cross sell a range of general insurance products and thus opened up a new revenue stream. For New India, the tie up with SBI has enabled it to tap into SBI's huge network and customer base.

Thus we may say that, SBI has the largest banking network in the county. The bank is looking for business from every customer segment of the bank- rural and urban segments, upper, middle and lower income segments and corporate segment. Therefore, Bancassurance has proved to be a great windfall for the bank.

UTILITIES OF BANCASSURANCE FOR BANKS

As a source of fee income

Banks traditional sources of fee income have been the fixed charges levied on loans and advances, credit cards, merchant fee on point of sale transactions for debit and credit cards, letter of credits and other operations. This kind of revenue stream has been more or less steady over a period of time and growth has been fairly predictable. However shrinking interest rate, growing competition and increased horizontal mobility of customers have forced bankers to look elsewhere to compensate for the declining profit margins and Bancassurance has come in handy for them. Fee income from the distribution of insurance products has opened new horizons for the banks and they seem to love it. From the banks point of view, opportunities and possibilities to earn fee income via Bancassurance route are endless. A typical commercial bank has the potential of maximizing fee income from Bancassurance up to 50% of their total fee income from all sources combined. Fee Income from Bancassurance also reduces the overall customer acquisition cost from the banks point of view. At the end of the day, it is easy money for the banks as there are no risks and only gains.

Product Diversification
In terms of products, there are endless opportunities for the banks. Simple term life insurance, endowment policies, annuities, education plans, depositors insurance and credit shield are the policies conventionally sold through the Bancassurance channels. Medical insurance, car insurance, home and contents insurance and travel insurance are also the products which are being distributed by the banks. However, quite a lot of innovations have taken place in the insurance market recently to provide more and more Bancassurancecentric products to satisfy the increasing appetite of the banks for such products.

Insurers who are generally accused of being inflexible in the pricing and structuring of the products have been responding too well to the challenges (say opportunities) thrown open by the spread of Bancassurance. They are ready to innovate and experiment and have set up specialized Bancassurance units within their fold. Examples of some new and innovative Bancassurance products are income builder plan, critical illness cover, return of premium and Takaful products which are doing well in the market. The traditional products that the

Building close relations with the customers

Increased competition also makes it difficult for banks to retain their customers. Banassurance comes as a help in this direction also. Providing multiple services at one place to the customers means enhanced customer satisfaction. For example, through bancassurance a customer gets home loans along with insurance at one single place as a combined product. Another important advantage that bancassurance brings about in banks is development of sales culture in their employees. Also, banking in India is mainly done in the 'brick and mortar' model, which means that most of the customers still walk into the bank branches. This enables the bank staff to have a personal contact with their customers. In a typical Bancassurance model, the consumer will have access to a wider product mix - a rather comprehensive financial services package, encompassing banking and insurance products.

FOR INSURANCE COMPANIES

Stiff Competition
At present there are 15 life insurance companies and 14 general insurance companies in India. Because of the Liberalization of the economy it became easy for the private insurance companies to enter into the battle field which resulted in an urgent need to outwit one another. Even the oldest public insurance companies started facing the tough competition. Hence in order to compete with each other and to stay a step ahead there was a need for a new strategy in the form of Bancassurance. It would also benefit the customers in terms of wide product diversification.

High cost of agents

Insurers have been tuning into different modes of distribution because of the high cost of the agencies services provided by the insurance companies. These costs became too much of a burden for many insurers compared to the returns they generate from the business. Hence there was a need felt for a Cost-Effective Distribution channel. This gave rise to Bancassurance as a channel for distribution of the insurance products.

Rural Penetration
Insurance industry has not been much successful in rural penetration of insurance so far. People there are still unaware about the insurance as a tool to insure their life. However this gap can be bridged with the help of Bancassurance. The branch network of banks can help make the rural people aware about insurance and there is also a wide scope of business for the insurers. In order to fulfill all the needs bancassurance is needed.

 Multi channel Distribution

Now a days the insurance companies are trying to exploit each and every way to sell the insurance products. For this they are using various distribution channels. The insurance is sold through agents, brokers through subsidiaries etc. In order to make the most out of Indias large population base and reach out to a worthwhile number of customers there was a need for Bancassurance as a distribution model.

Targeting Middle income Customers

In previous there was lack of awareness about insurance. The agents sold insurance policies to a more upscale client base. The middle income group people got very less attention from the agents. So through the venture with banks, the insurance companies can recapture much of the under served market. So in order to utilize the database of the banks middle income customers, there was a need felt for Bancassurance.

LEGAL REQUIREMENTS PERTAINING TO BANCASSURANCE

In our country the banking & insurance sectors are regulated by two different entities. They are a under: -

* Banking is fully governed by RBI & * Insurance sector is by IRDA

Bancassurance being the combination of the 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.

Guidelines given by RBI

The Reserve Bank of India has given certain guidelines for banks entering into the insurance sector. They are as follows: -

1. Any commercial bank will be allowed to undertake insurance business as the agent of insurance companies & this will be on fee basis with no-risk participation 2. The second guideline given by the RBI is that the joint ventures will be allowed for financial strong banks wishing to undertake insurance business with risk participation. 3. The third guideline is for banks which are not eligible for this joint venture option, an investment option of (1) up to 10% of the net worth of the bank or (2) Rs. 50 crores, whichever is lower, is available.

 Guidelines given by IRDA

The Insurance Regulatory and Development Authority has given certain guidelines for the Bancassurance. They are as follows: -

1) Chief Insurance Executive: Each bank that sells insurance must have a chief Insurance Executive to handle all the insurance matters & activities.

2) Mandatory Training: All the people involved in selling the insurance should under-go mandatory training at an institute accredited by IRDA & pass the examination conducted by the authority.

3) Corporate agents: Commercial banks, including co-operative banks and RRBs, may become corporate agents for one insurance company.

4) Banks cannot become insurance brokers.

BENEFITS of BANCASSURANCE

Bancassurance is a tool, which is beneficial to bank, customer & Insurer at a time. There are certain benefits of bancassurance which are: (1) From the banks point of view: Productivity of the employees increases. By selling the insurance product by their own channel the banker can increase their income. By providing customers with both the services under one roof, they can improve overall customer satisfaction resulting in higher customer retention levels. Increase in Return on Assets by building fee income through the sale of insurance products. Can leverage on face-to-face contacts and awareness about the financial conditions of customers to sell insurance products. The Bankers have extensive experience in marketing. They can easily attract customers & non-customers because the customer & non-customers also bank on banks. Banks are using different value added services life-E. Banking telebanking, direct mail & so on they can also use all the above-mentioned facility for Bancassurance purpose with customers & non-customers.

(II) From the Insurer Point of view: 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, and therby increase their business. Customer database like customers' financial standing, spending habits, investment and purchase capability can be used to customize products and sell accordingly. 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. By cutting cost Insurers can serve better to customers in terms lower premium rate and better risk coverage through product diversification.

(III) From the customers' point of view: Comprehensive financial advisory services under one roof. i.e., insurance services along with other financial services such as banking, mutual funds, personal loans etc. Enhanced convenience on the part of the insured Easy access for claims, as banks are a regular go. Innovative and better product ranges

The other benefits include:

Better customer retention and stronger relationships. Clear competitive advantage in the rural areas. Possibility that the insurers account as well as the accounts from the claimants will remain with the bank. Insurance products can augment the value of the banking products and services. Banks are in better position to offer complete integrated financial solutions.

THE WIN WIN CONDITION FOR BANKS AND INSURANCE COMPANIES

BANKS
Customer Retention

INSURANCE
Revenue and channel of Diversification

Satisfaction of more financial needs under same roof

Quality customer access

Revenue Diversification

Establish a low cost acquisition channel

Profitable resource utilization

Creation of brand image

Establish sales oriented culture

Quicker Geographical reach

Enrich work environment

Leverage service synergies with bank

BANCASSURANCE VENTURES MUST HAVE CLEAR OBJECTIVES

INSURERS

BANKS

Be aligned with good Public image of bank

Penetrate client base further with more products

Forge relationship earlier in customers life

Leverage positive image

Lower acquisition costs

Increase customer loyalty & retention

CUSTOMERS

Buy lower-costs products Buy more products from a Single source Get better, more efficient Service

THE INDIAN CONTEXT of BANCASSURANCE

In India, no company is allowed to transact both insurance and banking business. They are kept separate. In fact, even a company registered, as an insurer has to choose between life and non-life business. It cannot do both. Therefore, the banks in India cannot have the advantages, which are available in the European context.

There are joint ventures in India between banks and foreign insurers. State Bank of India, HDFC, ICICI and Vysya Bank are example. But apart from a greater willingness to help each other, the joint venture will not give either party a greater advantage in the other's business. The joint venture is an entirely independent unit of Operation with separate personnel and funds and subject to different regulations.

The only way in which banks can be associated with the insurance business in India is by becoming a corporate agent, for remuneration. The bank can do so for a particular life insurer and/or particulars non-life insurer. The bank cannot develop any of its intimate contacts with the customers. Since 2000many banks and insurers have agreed to arrangement for mutual benefits. The LIC has tied with more than one bank. So also have other insurers.

For more than a hundred years, insurance business had been sold through insurance agent and their supervisors. This system had not been very satisfactory. The efforts to make the agents more professional had not yielded very satisfactory results, despite incentives and training programmes. Many of them continue to treat the agency business casually, as just a source of additional income. The turnover had been high and the efforts of replenishing the strength, costly. The banks have skilled staff, to which the procurement of insurance can reassigned as a duty. This was an opportunity made available after the regulation of IRDA.

In India, there are a number of reasons why bancassurance could play a natural role in the insurance market. First, banks have a huge network across the country. Second, banks can offer fee-based income for the employees for insurance sales. Third, banks are culturally more acceptable than insurance companies. Dealing with (life) insurance, in many parts of

India, conjure up an image of a bad omen. Some bank products have natural complementary insurance products. For example, if a bank gives out a home loan, it might insist on a life insurance cover so that in case of death of the borrower, there is no problem in paying off the home loan.

Bancassurance is: The provision of a complete range of banking, investment and insurance product and services, to meet the individual needs of the customers of the bank and its associates.

ABOUT THE TOPIC

What is BANCASSURANCE?

With the opening up of the insurance sector and with so many players entering the Indian insurance industry, it is required by the insurance companies to come up with innovative products, create more consumer awareness about their products and offer them at a competitive price. Since the banking services, insurance and fund management are all interrelated activities and have inherent synergies, selling of insurance by banks would be mutually beneficial for banks and insurance companies. With these developments and increased pressures in combating competition, companies are forced to come up with innovative techniques to market their products and services. At this juncture, banking sector with it's far and wide reach, was thought of as a potential distribution channel, useful for the insurance companies. This union of the two sectors is what is known as Bancassurance.

Bancassurance is defined as Selling Insurance products through banks. The word is a combination of two words Banc and assurance signifying that both banking and insurance products and service are provided by one common corporate entity or by banking company with collaboration with any particular Insurance company. 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. Bancassurance in its simplest form is the distribution of insurance products through a banks distribution channels. It is the provision of insurance and banking products and service through a common distribution channel or through a common base. Banks, with their geographical spreading penetration in terms of customers reach of all segments, have emerged as viable source for the distribution of insurance products. It takes various forms in various countries depending upon the demography and economic and

legislative climate of that country. This concept gained importance in the growing global insurance industry and its search for new channels of distribution. However, the evolution of bancassurance as a concept and its practical implementation in various parts of the world, have thrown up a number of opportunities and challenges.

The motives behind bancassurance also vary. For Banks, it is n means of product diversification and source of additional fee income. 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 products and delivery at the doorsteps. With the liberalization of the insurance sector and competition tougher than ever before, companies are increasingly trying to come out with better innovations to stay that one-step ahead. Progress has definitely been made as can be seen by the number of advanced products flooding the market today - products with attractive premiums, unitized products, unit-linked products and innovative riders. Currently, insurance agents are still the main vehicles through which insurance products are sold. But in a huge country like India, one can never be too sure about the levels of penetration of a product. It therefore makes sense to look at well-balanced, alternative channels of distribution. Nationalized insurers are already well established and have an extensive reach and presence. New players may find it expensive and time consuming to bring up a distribution network to such standards. Yet, if they want to make the most of India's large population base and reach out to a worthwhile number of customers, making use of other distribution avenues becomes a must. Alternate channels will help to bring down the costs of distribution and thus benefit the customers. Hence, bancassurance seems to be the need of the hour for Indian banks as well as insurance companies.

Meaning
Bancassurance is the distribution of insurance products through the bank's distribution channel. It is a phenomenon wherein insurance products are offered through the distribution channels of the banking services along with a complete range of banking and investment products and services. To put it simply, Bancassurance, tries to exploit synergies between both the insurance companies and banks. Bancassurance can be important source of revenue. With the increased competition and squeezing of interest rates spread, profits are likely to be under pressure. Fee based income can be increased through hawking of risk products like insurance. Bancassurance if taken in right spirit and implemented properly can be win-win situation for the all the participants' viz., banks, insurers and the customer.

ORIGIN

The banks taking over insurance is particularly well-documented with reference to the experience in Europe. Across Europe in countries like Spain and UK, banks started the process of selling life insurance decades ago and customers found the concept appealing for various reasons. Germany took the lead and it was called ALLFINANZ. The system of bancassurance was well received in Europe. France taking the lead, followed by Germany, UK, Spain etc. In USA the practice was late to start (in 90s). It is also developing in Canada, Mexico, and Australia. In India, the concept of Bancassurance is very new. With the liberalization and deregulation of the insurance industry, bancassurance evolved in India around 2002.

MODELS OF BANCASSURANCE

I.

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 ban0k 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, 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 intricate 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.

II.

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.

OBJECTIVES OF THE STUDY

Primary objective: To assess the present scenario of Bancassurance in India and how it is gaining world wide acceptance with special reference to SBI.

OTHER OBJECTIVES:

To know about the benefits of Bancassurance to the banks, insurance companies and to the customers. To study the progress of SBI in the direction of Bancassurance. To find out the strengths and weaknesses of SBI in the Bancassurance arena. Finally, to conclude the findings and suggest the necessary corrective measures and recommendations regarding the future growth prospects of SBI.

RESEARCH METHODOLOGY
Research methodology is a systematic way, which consists of series of action steps, necessary to effectively carry out research and the desired sequencing to these steps. The marketing research is a process of involves a no. of inter-related activities, which overlap and do rigidly follow a particular sequence. It consists of the following steps: Formulating the objective of the study Designing the methods of data collection Selecting the sample plan Collecting the data Processing and analyzing the data Reporting the findings

Objective of Study Research Design Sample Design Data Collection Data Analysis Report of findings

RESEARCH DESIGN
Research design specifies the methods and procedures for conducting a particular study. A research design is the arrangement of conditions for collection and analysis of the data in a manner that aims to combine relevance to the research purpose with economy in procedure. Research design is broadly classified into three types as

Exploratory Research Design Descriptive Research Design Causal Research Design

I have chosen the descriptive research design.

DESCRIPTIVE RESEARCH DESIGN:

Descriptive research studies are those studies which are concerned with described the characteristics of particular individual. In descriptive as well as in diagnostic studies, the researcher must be able to define clearly, what he wants to measure and must find adequate methods for measuring it along with a clear cut definition of population he want to study. Since the aim is to obtain complete and accurate information in the said studies, the procedure to be used must be carefully planned. The research design must make enough provision for protection against bias and must maximize reliability, with due concern for the economical completion of the research study.

SAMPLE DESIGN

A Sample Design is a definite plan for obtaining a sample from a given population. It refers to the technique to the procedure adopted in selecting items for the sampling designs are as below:

SAMPLE SIZE:

The substantial portions of the target customer that are sampled to achieve reliable result are 50. The cost and time limitation completed me to select 50 respondents as sample size

SAMPLING METHOD: In this marketing research project, I am using Random sampling method.

A random sample gives every unit of the population a known and non-zero probability of being selected. Since random sampling implies equal probability to every unit in the population, it is necessary that the selection of the sample must be free from human judgment.

SAMPLE TECHNIQUE

I have taken the Statistical tool of percentage method to analysis and interpretation of the collected data.

DATA COLLECTION

The study was conducted by the means of personal interview with respondents and the information given by them were directly recorded on questionnaire. For the purpose of analyzing the data it is necessary to collect the vital information. There are two types of data:-

PRIMARY DATA:-

Primary data can be collected through questionnaire. The questionnaire can be classified into four main types. Structured non disguised questionnaire Structured disguised questionnaire.

Non structured non disguised questionnaire Non structured disguised questionnaire.

For my market study, I have sleeted structured non-disguised questionnaire because my questionnaire is well structured, listing of questions are in a prearranged order and where the object of enquiry is revealed to the respondents. To making a well-structured questionnaire, we have adopted three types of questions

Open ended question Dichotomous questions Multiple choice questions

These types of questions are easy to understand and easy to give required answers.

Secondary Sources of Data

The research methodology adopted for this project is Secondary. The secondary data is that data which have already been collected by someone else and which have already been passed through the statistical process. Such data may be in published or unpublished form. Thus, it has the following merits: o It is an instant method to get the data. o Large area can be covered in very less time. o It is cost effective and various kinds of problems are evaded.

On the other hand, it suffers from following demerits: o The data available might not have been collected for the same purpose. o Authenticity of data is not there. o Problems of person may remain unsolved and hence data may be unreliable.

The information and data has been collected from various secondary sources which are as following:

Books Websites Financial Newspapers Financial reports of SBI

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 line insurance. People rely more upon LIC and GIC for taking insurance. If the products of LIC and GIC are provided through bancassurance it would be an added advantage to the insurance companies. 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. Other than all these things there is a huge potential for insurance sector, as the population of India is high and a large part of it has remained untapped till now. So this can create an added advantage for both banks and insurers.

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 themselves 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. The visit of a customer to the bank is to have a simple transaction like deposit or withdrawal. Busy customers will have no time to have a discussion on a long-term durable purchase like insurance across the counter. Also, the visits in urban or metro branches are going to be fewer because of ATMs and e-banking. Another drawback is the inflexibility of the products i.e. it cannot be tailor made to the requirements of the customer. For a bancassurance venture to succeed it is extremely essential to have in-built flexibility so as to make the product attractive to the customers.

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.

Banks in their normal course of functions lend finance in the form of loans for cars, or for buying a house to clients etc. They can take advantage of this by cross-selling the insurance products and combine it as a package.

Another area that could be of interest to bankers to sell insurance is exploiting the corporate customers and tying up for insurance of the employees of corporate clients, which would be an avenue with easy access. In most cases banks provide salary disbursement and loan facilities but here they can provide insurance cover as well.

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.

There would be a problem of Reputational Contagion i.e. loss of market confidence towards one in a venture leading to loss of confidence on the other because of identical brand recognition, similar management and consolidated financial reporting etc.

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.

 The most common obstacles to success of Bancassurance are poor manpower management, lack of a sales culture within the bank, no involvement by the branch manager, insufficient product promotions, failure to integrate marketing plans, marginal database expertise, poor sales channel linkages, inadequate incentives, resistance to change, negative attitudes toward insurance and unwieldy marketing strategy.

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

Yes 80%

No

Interpretation:

Among those who surveyed, 80% of respondents were aware that their bank provided bancaasurance.

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 23% 20 10 0

63%

42%

18%

Deposit Based Loan Based Life Insurance Interpretation:

Others

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

Bank 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 were 4o% 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 Bancaasurance? 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.

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.

Banks now-a-days are trying to provide each and every service to its customers. So by providing insurance, banks can add one more service to their list.

LIMITATIONS OF THE STUDY

Although I had a wonderful experience in completing my project, yet I faced little difficulties. Every task has its own limitations, and so did the study undertaken by me had. They were as follows:

The project is based entirely on the secondary data and hence the authenticity depends wholly on the truthfulness of the data available from the secondary sources.

Time was too short to do an analysis of the present scenario of Bancassurance, prevalent in the country.

While an attempt has been made to explore the scope and fulfill the objectives of the study, yet it required a great deal. Thus, more expertise and experience was needed for conducting the study extensively.

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.

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, no personal contact with customers, inadequate incentives to agents and unfullfilment 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.

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
Insurance watch.

Business world.

Business today.

Theories and Practices in Insurance.

Webliography
www.insuremagic.com

www.google.com

www.sbilife.com

www.india infoline.com

QUESTIONARE

Name: Sex: Male Occupation: Age: Phone no. : Female

1. Are you aware of bancassurance?

Yes

No

2. Have you taken an insurance policy from your bank?

Yes

No

3. The kind of insurance policy taken from the bank?

Deposit based

loan based

Life insurance

Others

4. Reasons for taking an insurance policy?

Security

Savings

Brand image of bank insurance

Brand image of

5. On your choice which mode of insurance distribution channel would you prefer to buy the policy from?

Insurance company

Bank

Broker

Agent

6. Which bank do you feel would excel in bancaasurance? Rate them accordingly

Public sector banks

Private sector Banks

Foreign Bank

7. Do you think bancassurance has a good future?

Yes

No