EXECUTIVE SUMMARY

The banking and insurance industry have changed rapidly in the changing and challenging economic environment through out the world. In the competitive and liberalized environment everyone is trying to do better than others and consequently survival of the fittest has come into effect. Insurance companies are also to be competitive by cutting cost and serving in a better way to the customers. Now the time has come to choose and adopt appropriate distribution channel through which the insurance companies can get the maximum benefit and serve customers in manifolded ways. Multi channel distribution and marketing of insurance products will be the smart strategy to continue to play an important role in distribution, alternative channels like corporate agents brokers and bancassurance will play a greater role in distribution.

One of the more recent examples of financial diversification is bancassurance, the term given to the distribution of insurance products through branches or other distribution channels of the banks. The concept that originated in France, now constitutes the dominant model in a number of European and other countries and the same is fast catching up in India as well.But there are challenges, the most common challenges to success of bancassurance are poor manpower management, lack of a sales culture within the bank, insufficient product promotions, failure to integrate marketing plans, marginal database expertise, poor sales channel linkages, inadequate incentives, resistance to change, negative attitude towards insurance and unwieldy marketing strategy. Even insurers and banks that seem ideally suited for a bancassurance partnership can run into problems during implementation. One more important obstacle in development of bancassurance in India has been a set of regulatory barriers.

INDEXSR.NOCHAPTERPAGE NO.

Preface

1. Introduction Definition and Meaning9

2. History10

3. Reasons of Existence of bancassurance15

4. Regulations for Bancassurance In India18

5. Utilities and Benefits of Bancassurance32

6. Distribution channels in Bancassurance39

7. Recommendations to Improve/Implement Bancassurance45

8. SWOT Analysis of Bancassurance48

9. Bancassurance Articles54

Conclusion

Bibliography and Webliography

Annexure

PREFACE

OBJECTIVES

To study Bancassurance & how does it works.

To study the services of the Bancassurance offered to the customer.

To show how the Bancassurance deals with customer complaints.

To explain the scope , success & powers of the Bancassurance .

METHODLOGY

Data collection method: Primary data is collected through; Observation Discussion with the bank manager and bank employees. Filling up of the questionnaire from the bank staff. Tools used for analysis: MS Excel Graphs and charts Secondary data is gathered through; The financial statements of the bank. From various books, websites, magazines, bank brochures etc.

Bancassurance

Introduction: Bancassurance" is a buzzword in todays financial markets. What is bancassurance? Insimple terms it is the distribution of insurance products by banks. All the major markets of the world have moved towards this concept; some are well into it, others are gravitating towards it, yet others are still contemplating it.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. New entrants in the insurance sector had no difficulty in matching their products with the customers' needs and offering them at a price acceptable to the customer.

But, insurance not being an off the shelf product and one which requiring personal counseling and persuasion, distribution posed a major challenge for the insurance companies. Further insurable population of over 1 billion spread all over the country has made the traditional channels of the insurance companies costlier. Also due to heavy competition, insurers do not enjoy the flexibility of incurring heavy distribution expenses and passing them to the customer in the form of high prices

Definition:According to IRDA, Bancassurancerefers to banks acting as corporate agents for insurers to distributeinsuranceproducts. Insurance Products include Life or Non-Life products.Bancassurance,i.e., banc+assurance, refers to banks sellingthe insurance products.

Meaning:The term "bancassurance" was coined in the 1980"s in France. Bancassurance is defined as the distribution of insurance products through banks. In addition to the branches of banks, this medium of distribution also includes new distribution systems. Such as electric banking operation, ATM's etc. Although the term bancassurance may also be used for distribution of banking products through insurance companies, this is sometimes termed "assurbanking" in some countries. Bancassurance has been most successful in Europe, mainly due to the regulatory and tax environment.

In France alone, banks conduct more than 60% of the insurance business. In the rest of Europe, business through bancassurance amounts to 45% of the total insurance business while, in the US where bancassurance began only a decade back, it amounts 5% of the total insurance transactions.Both insurers as well as bankers view the cross selling relationship involved in bancassurance as part of a long term strategy. Accordingly, they are adapting themselves organizationally. So, as achieve the long term bancassurance goals in the best possible manner. In some countries, banks have either acquired or set up their own insurance product manufacturing capacity. In some cases, insurance companies have acquired smaller banks.

Bancassurance in its simplest form is the distribution of insurance products through a banks distribution channels. It is the provision of insurance and services through a common distribution channel or through a common base.Banks with their geographical spreading penetration in terms of customer reach of all segments, have emerged as viable sources 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.

History:-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.

Objectives:-Banking and insurance have more commonality in the basic nature of their business. Banking and insurance relay on pulling on resources to protect financial security (Banking) or to protect against adverse events (Insurance), Banking and Insurance are often complimentary, as it the case of mortgages, that require both finance and property insurance.In Insurance, the initial expenses because of distribution costs are high and regulatory disclosure requirements are applying additional pressure, on the insurers to reduce the costs. Distribution expenses being a major of initial expense, insurers are focused to think on alternate channels of distribution and banks have a lot of common practices to integrate to achieve economies of scale

Emergence of Bancassurance in India

The growth in bancassurance is being driven by several leading public and private sector banks that have set up their own life insurance companies.

Banking Sector has undergone unprecedented change after the implementation of Narasimham Committee and Khan Committee (1999). Based on their recommendations, Central Govt. has passed a notification under Banking Regulations Act, which would allow Bancassurance to be done by the Indian Banks. Moreover the Bancassurance has also started to spread its wings by the notification of Insurance Regulatory Development Authority (IRDA) regarding the permissions to the bank to act as an agent of one life and one non life Insurer.Bancassurance in India is defined as those banks which are dealing in insuranceproducts of both life and non-life type in any forms.Bancassurance allows the insurance company to maintain smaller direct sales teams as their products are sold through the bank to bank customers by bank staff and employees as well.Bank staff and tellers, rather than an insurance salesperson, become the point of sale and point of contact for the customer. Bank staff are advised and supported by the insurance company through product information, marketing campaigns and sales training.The bank and the insurance company share the commission. Insurance policies are processed and administered by the insurance company.

This partnership arrangement can be profitable for both companies. Banks can earn additional revenue by selling the insurance products, while insurance companies are able to expand their customer base without having to expand their sales forces or pay commissions to insurance agents or brokers.Bancassurance, the sale of insurance and pensions products through a bank, has proved to be an effective distribution channel in a number of countries in Europe, Latin America, and Asia.

Source of salesIndias population of 1.24 billion is the second-largest in the world, and its demographics are favorable: 65% are in the productive age group of 15 64, and 25% are in the 40 65 age group. This demographic sweet spot drives economic growth with increased spending on goods and services, including insurance. Overall, wealth has significantly increased. In 2000, India had US$1.2 trillion of wealth and was ranked as the 14th-wealthiest country in the world, while in mid-2013, it inched closer to entering the top 10 wealthiest nations in the world, with US$3.6 trillion in wealth. There is a major caveat, however. While wealth has been rising, and the middleand upper classes are enjoying this growth, personal wealth distribution is highly skewed, with the top 0.4% having a net worth of more than US$100,000. Even so, 4.96 million citizens are suited for various financial products, including insurance. Whats more, a large proportion of the population is uninsured, and even those who have insurance are significantly underinsured. However, India also faces challenges. The World Governance Indicators 2013 ranks India low on political stability, and around the median for government effectiveness and regulatory quality. For instance, foreign entrants are particularly attuned to foreign direct investment limits,capital requirements and repatriation of profits.

A Demographic Sweet Spot

Bancassurance as a Percentage of Total Distribution Reasons of Bank existence in Bancassurance:Globalization of Financial Sector, Integration at Global Level, Technological Development has increased the competition. The Banks are facing the problem of reduced business margins. Following are some of the main reasons for the entry of Banks in Bancassurance:

i. Banks margin are squeezing. So the new avenues are required to sustain their profitability.ii. Movements of Banks to Universal Banking would tend to act the Bank as a Financial Superstore and Financial/Insurance Products would be available.iii. Marketing Cost by the Banks would be comparatively very less due to the existing network of the Bank customers.iv. Banks would in a position to tap the enlarged clientele due to continuous interaction of Bank Customer with Bank branches.v. Reduced administrative and selling cost would help the Bank to offer diverse products under one roof.vi. Efficiency and Productivity of Bank Staff would be increased.vii. Existing Database of the bank customers will be utilized to sell the product(banking as well as insurance)viii. The credibility and confidence of the customers can be used by the Banks.ix. The Banks can get fee-based-non-interest income. So it does not involve any risk.x. It would help the Banks to maintain Capital Adequacy Ratio.xi. Banks does not require any additional capital so the comfort level of Banks can be improved.xii. As the Non Interest Income increases, then the total income would also.xiii. The Banks can optimally utilize their excessive manpower.xiv. The Bank can insure own buildings, safe furniture, computers etc. against fire, theft etc.xv. The Banks can use their marketing campaigns to sell and promote insurance products without additional efforts to generate income.

Reasons of Insurance Companies entering into Bancassurance:Insurance Companies would like to take advantages of marketing campaign by the Banks, the customer database to sell their insurance products and services. Following are some of the reasons of the existence of Insurance Companies in to Bancassurance:

i. The Insurance Companies can expand their existing area of operations.ii. The Insurance Companies can use the Brand Image of the banks to increase the sales of their products and services.iii. The Insurance Companies can tap the potential customers available in the Urban and Remote areas through the Bank branchesiv. It also reduces the administrative and marketing cost of selling policies.v. Insurance Companies can get access to the ready customer base of the Banks.vi. It also leads to the lower customer acquisition cost.vii. It also helps to sell new products at lower cost under one roof to the customers.viii. It also leads to the quicker reaching to the untapped market.

Bancassurance in India:As per March 2014, the number of Insurance companies in India,

Life Insurance Companies23 Private Insurance Companies

2 Public Insurance Company

Non- life Insurance Companies18 Private Insurance Companies

5 Public Insurance Company

Insurance CompanyBank

Life Insurance Corporation of IndiaCorporation Bank, Indian Overseas Bank, Centurion Bank, Satara District Central Cooperative Bank, Janata Urban Co operative Bank, Yeotmal Mahila Sahkari Bank, Vijaya Bank, Oriental Bank of Commerce.

Birla Sun Life Insurance Co LtdThe Bank of Rajasthan, Andhra Bank, Bank of Muscat, Development Credit Bank, Deutsche Bank Catholic Syrian Bank

Aviva Life InsuranceCanara Bank, Lashmi Vilas Bank, American Express Bank, ABN Amro Bank.

ICICI PrudentialLord Krishna Bank,ICICI Bank,Bank of India,Citibank,Allahabad Bank,Federal Bank,South Indian Bank, andPunjab and Maharashtra

HDFC Standard Life InsuranceUnion Bank Of India

Tata AIGHSBC, United Bank of India

SBI LifeSBI, BNP Paribas

As regarding the present size of the insurance market in India, it isstated that India accounts not even one per cent of the globalinsurance market. However, studies have pointed out that Indiasinsurance market is expected to grow rapidly in the next 10 years.Insurance industry in India for fairly a longer period reliedheavily on traditional agency (individual agents) distribution network,Therefore, the zeal for discovering new channelsof distribution and the aggressive marketing strategies were totally absentand to an extent it was not felt necessary. As the insurance sector is poised for arapid growth, in terms of business as well as number of new entrantstough competition has become inevitable. Consequently, addition of newand number of distribution channels would become necessary.

Sales and Policy Issue

Further Underwriting Required

Completes Basic UnderwritingFrontEndSystem

Bank Staff

NO Handed To

Policy Issued

Bank Customers

REGULATIONS FOR BANCASSURANCE IN INDIA

RBI Guidelines for the Banks to enter into Insurance Business:

Following the issuance of Government of India Notification dated August 3, 2000, specifying Insurance as a permissible form of business that could be undertaken by banks under Section 6(1)(o) of the Banking Regulation Act, 1949, RBI issued the guidelines on Insurance business for banks.1. Any scheduled commercial bank would be permitted to undertake insurance business as agent of insurance companies on fee basis, without any risk participation. The subsidiaries of banks will also be allowed to undertake distribution of insurance product on agency basis.2. Banks which satisfy the eligibility criteria given below will be permitted to set up a joint venture company for undertaking insurance business with risk participation, subject to safeguards. The maximum equity contribution such a bank can hold in the joint venture company will normally be 50 per cent of the paidup capital of the insurance company. On a selective basis the Reserve Bank of India may permit a higher equity contribution by a promoter bank initially, pending divestment of equity within the prescribed period. The eligibility criteria for joint venture participant are as under:i. The net worth of the bank should not be less than Rs.500 crore;ii. The CRAR of the bank should not be less than 10 per cent;iii. The level of non-performing assets should be reasonable;iv. The bank should have net profit for the last three consecutive years;v. The track record of the performance of the subsidiaries, if any, of the concerned bank should be satisfactory.3. In cases where a foreign partner contributes 26 per cent of the equity with the approval of Insurance Regulatory and Development Authority/Foreign Investment Promotion Board, more than one public sector bank or private sector bank may be allowed to participate in the equity of the insurance joint venture. As such participants will also assume insurance risk, only those banks which satisfy the criteria given in paragraph 2 above, would be eligible.4. A subsidiary of a bank or of another bank will not normally be allowed to join the insurance company on risk participation basis. Subsidiaries would include bank subsidiaries undertaking merchant banking, securities, mutual fund, leasing finance, housing finance business, etc.5. Banks which are not eligible for joint venture participant as above, can make investments up to 10% of the net worth of the bank or Rs.50 crore, whichever is lower, in the insurance company for providing infrastructure and services support. Such participation shall be treated as an investment and should be without any contingent liability for the bank.6. The eligibility criteria for these banks will be as under :i. The CRAR of the bank should not be less than 10%;ii. The level of NPAs should be reasonable;iii. The bank should have net profit for the last three consecutive years.7. All banks entering into insurance business will be required to obtain prior approval of the Reserve Bank. The Reserve Bank will give permission to banks on case to case basis keeping in view all relevant factors including the position in regard to the level of non-performing assets of the applicant bank so as to ensure that non-performing assets do not pose any future threat to the bank in its present or the proposed line of activity, viz., insurance business. It should be ensured that risks involved in insurance business do not get transferred to the bank and that the banking business does not get contaminated by any risks which may arise from insurance business. There should be arms length relationship between the bank and the insurance outfit.

The Insurance Regulatory and Development Authority (IRDA) guidelines for the Bancassurance:

1) Each bank that sells insurance must have a chief insurance executive to handle all the insurance activities.2) All the people involved in selling should under go mandatory training at an institute accredited by IRDA and pass the examination conducted by the authority.3) Commercial banks, including cooperative banks and regional rural banks, may become corporate agents for one insurance company.4) Banks cannot become insurance brokers.Insurance Agency Business/ Referral ArrangementThe banks (includes SCBs and DCCBs) need not obtain prior approval of the RBI for engaging in insurance agency business or referral arrangement without any risk participation, subject to the following conditions:i. The bank should comply with the IRDA regulations for acting as composite corporate agent or referral arrangement with insurance companies.ii. The bank should not adopt any restrictive practice of forcing its customers to go in only for a particular insurance company in respect of assets financed by the bank. The customers should be allowed to exercise their own choice.iii. The bank desirous of entering into referral arrangement, besides complying with IRDA regulations, should also enter into an agreement with the insurance company concerned for allowing use of its premises and making use of the existing infrastructure of the bank. The agreement should be for a period not exceeding three years at the first instance and the bank should have the discretion to renegotiate the terms depending on its satisfaction with the service or replace it by another agreement after the initial period. Thereafter, the bank will be free to sign a longer term contract with the approval of its Board in the case of a private sector bank and with the approval of Government of India in respect of a public sector bank.iv. As the participation by a banks customer in insurance products is purely on a voluntary basis, it should be stated in all publicity material distributed by the bank in a prominent way. There should be no linkage either direct or indirect between the provision of banking services offered by the bank to its customers and use of the insurance products.v. The risks, if any, involved in insurance agency/referral arrangement should not get transferred to the business of the bank.

Licensing of Bancassurance Agents, IRDA Regulations

In exercise of the powers conferred by sub-section (2) of section 114A of the Insurance Act, 1938 read with sections 14 and 26 of the Insurance Regulatory and Development Authority Act, 1999, the Authority, in consultation with the Insurance Advisory Committee, hereby makes the following regulations, namely

1. Short title and commencement(1) These regulations may be called the Insurance Regulatory and Development Authority (Licensing of Bancassurnace Agents) Regulations, 2002(2) They shall come into force on the date of their publication in the Official Gazette. However, the banks licensed under corporate agency under IRDA (Licensing of Corporate Agents) Regulations, 2002 shall govern under these regulations on expiry of the license or on termination of the existing license.2. Definitions In these regulations, unless the context otherwise requires, -i. Act means the Insurance Act, 1938 (4 of 1938)ii. Authority means the Insurance Regulatory and Development Authority established under the provisions of section 3 of the Insurance Regulatory and Development Authority Act, 1999iii. Applicant means any institution including Non-Banking Finance Companies licensed under Banking Regulations Act, 1949 to accept deposit from public.iv. Bancassurance Agent means an applicant specified in clause (iii) and licensed to act as such under these regulations:v. Certification means the process by which a Specified Person or Chief Bancassurance Executive of the Bancassurance Agent, who has passed the required examination, is issued a Certificate entitling him to solicit and procure insurance business on behalf of the Bancassurance Agent.vi. Chief Bancassurance Executive means an officer of the bancassurance agent so nominated by its Board of Director, who possesses the requisites qualification whohave passed such an examination as required under clauses (e) and (f) of Section 42of the Act.vii. Deficiency in Service means any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance by the Bancassuranceagent which is required to be maintained under any law for the time being in enforce.viii. Market Consistent Embedded Value (MCEV) means the Market ConsistentEmbedded Value calculated as per the method specified by Institute of Actuaries ofIndia.ix. Period of Amortization means the period during which insurer is allowed to amortize the difference of the Market Consistent Embedded Value and purchase value of the equity of the insurer.x. Specified Person means one or more of its officers or other employees so designated by Bancassurnace Agent who has passed the required examination, certification and who is responsible for soliciting and procuring insurance business on behalf of the Bancassurance Agent.xi. Zone means any one of the three zones as under

I. Zone A includes the following states and Union Territoriesi. Keralaii. Gujaratiii. Andra Pradesh excluding Hyderabadiv. Tamil Nadu excluding Chennaiv. West Bengal excluding Kolkatavi. Karnataka excluding Bangalorevii. Maharashtra excluding Mumbaiviii. Chandigarhix. Hyderabadx. Bangalorexi. Chennaixii. Delhixiii. Mumbai.II. Zone B- includes the following States and Union Territoriesi. Rajasthanii. Assamiii. Jharkhandiv. Haryana excluding Chandigarhv. Orissavi. Biharvii. Punjab excluding Chandigarhviii. Madhya Pradeshix. Uttar Pradesh

III. Zone C- includes the following States and Union Territoriesi. Lakshadweepii. Dadra &Nagrahaveliiii. Daman & Diuiv. Andaman & Nicobarv. Mizoramvi. Arunachal Pradeshvii. Sikkimviii. Nagalandix. Meghalayax. Manipurxi. Punducherryxii. Tripuraxiii. Goaxiv. Jammu & Kashmirxv. Himachal Pradeshxvi. Uttrakhandxvii. Chattisgarh

(2) All words and expression used herein and not defined but defined in the Act, or in the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999), or in any of the regulations made by the Authority shall have the meanings respectively assigned to them in those Acts or regulations.3. Issue or renewal of license(1) An applicant desiring to obtain a license to act as a bancassuranceagent shall make an application to the Authority in Form IRDA-BA-A_1 along with the fee of Rs.500/- (Rs.Five Hundred Only) to the Authority .(2) While considering the applicant, Authority shall take into account, all matters affecting distribution of the insurance products by the applicant or its promoters/ shareholders. In particular and without prejudice to the generality of the foregoing, the Authority shall consider the following matters for grant of license to the applicant namely(a) the record of performance of applicant company in the field of business the applicant is engaged in;(b) the record of performance of the directors and person in management of the applicant, more particularly of the Chief Bancassurance Insurance Executive of the applicant company and on being satisfied that the Chief Bancassurance Executive of the applicant possess the required qualification, experience is not disqualified otherwise.(c) The planned infrastructure of the applicant company, including branches in rural areas, to effectively carry out the distribution business of insurance products.4. Ceiling on number of tie ups on Bancassurance Agent : No bancassurance Agent shall tie up with more than one life, one non-life and onestandalone health insurance company in any of the states in addition to one each specialised Insurance companies. Further Provided that in case the agreement of general insurer/s do not have any health product to distribute, the Bancassurance Agent may tie up with one more generalinsurance company carrying on exclusively business of health insurance.5. Ceiling on number of tie up on Insurance CompanyNo insurers other than the specialized insurer shall tie up with any bancassurance agentin more than nine states / Union Territories in Zone A and six states / Union Territoriesin Zone B.6. Qualifications(1) The applicant shall ensure that Memorandum of Association or any other document evidencing the constitution of the entity shall contain as one of its main objects soliciting or procuring insurance business as a Bancassurance Agent. (2) The Chief Bancassurance Executive shall possess the minimum qualificationi. an Associate/Fellow of the Insurance Institute of India, Mumbai;ii. an Associate/Fellow of the Institute of Chartered Accountants of India, New Delhi;iii. an Associate/Fellow of the Institute of Costs and Works Accountants of India, Calcutta;iv. an Associate/Fellow of the Institute of Company Secretaries of India, New Delhi;v. an Associate/Fellow of the Actuarial Society of India, Mumbai;vi. a Master of Business Administration of any Institution/ University recognised by any State Government or the Central Government;vii. possessing Certified Associateship of Indian Institute of Bankers (CAIIB);viii. possessing any professional qualification in marketing from any institution / University recognized by any State Government or the Central Governmentix. Any other qualification as may be recognized by the Authority. (3) A specified person shall possess the minimum qualifications of a pass in graduation or equivalent examination conducted by any recognised University /Institution. (4) Every chief bancassurance Executive and each of the specified persons shall also not suffer from any of the disqualifications specified under Section 42D of the Act.7. Examination(1) The Chief Bancassurance Executive of the applicant or a specified person shall havepassed the pre-recruitment examination in life or general insurance business, or both,as the case may be, conducted by the Insurance Institute of India, Mumbai, or any otherexamining body duly recognised by the Authority. (2) The examining body shall issue a certificate to every successful specified person, whichshall make him eligible to procure insurance business on behalf of the bancassuranceagent.8. Fee Payable(1) The fee payable to the Authority for issue or renewal of license to act as a bancassurance Agent shall be rupees Two Hundred Fifty only.(2) Every specified person of the Bancassurance Agent shall, apply through the Bancassurance Agent to the designated person of the insurer to obtain the certificate, accompanied by a fees of rupees five hundred remitted to the Authority.

9. Use of the Logo / Identity of the BankAll the products of the insurers can be distributed by the bancassurance agent. However, Authority after notification of these regulations may permit insurers to carry the name and logo of the bancassurance agent for the products exclusively distributed through that bancassurance agent.10. Remuneration(1) No Bancassurance Agent shall be paid or contracted to be paid by way of commission an amount exceeding the 85% of the limit specified in Section 40A of the Insurance Act, 1938.(2) In case the products filed and cleared by the Authority before notification of these regulations in terms of Regulation 9, the maximum remuneration to be to the Bancassurance Agent shall not exceed the remuneration specified under F&U Guidelines at the time of filing of the product.

Provided that an amount not exceeding 2.50% of the premium may also be paid for sharing of the infrastructure, cost of training and incentive to specified person to the specified persons. The said payment will be counted for computation of the management expense under Section 40C of the Insurance Act, 1938

Provided that no bancassurance Agent / Chief Bancassurance Agent / Specified person shall pay or allow the payment of any fee, commission, incentive by any other name whatsoever for the purpose of sale, introduction, lead generation, referring or finding to any person or entity.11.Code of Conduct(1) Every Bancassurance Agent shall abide by the code of conduct specified below.Every Bancassurance Agent shall:(i) be responsible for all acts of omission and commission of its Chief Bancassurance Executive and every specified person;(ii) ensure that the reporting level of the Chief Bancassurance Executive is not below the Managing Director or equivalent of the company.(iii) Ensure that each branch of the Bancassurance Agent has a specified person whose particulars have been filed with designated person.(iv) Ensure that the Chief Bancassurance Executive and all specified persons are properly trained, skilled and knowledgeable in the insurance products they market.(v) Ensure that the Chief Bancassurance Executive and the specified person do not make to the prospect any misrepresentation on the policy benefits and returns available under the policy;(vi) Ensure that no prospect is forced to buy an insurance product(vii) Give adequate pre-sale and post sales advice to the insured in respect of the insurance product.(viii) Ensure that every sale of the insurance products is supported by the need analysis format duly signed by the insured.(ix) Extend all possible help and co-operation to an insured in completion of all formalities and documentation in the event of a claim;(x) Give due publicity to the fact that the Bancassurance Agent does not underwrite the risk or act as an insurer;(xi) Enter into service level agreement with the insurer in which the duties and responsibilities of both are defined.

(2) Every Bancassurance Agent or a Chief Bancassurance Executive or a specified person shall(a) identify himself and the insurance company of whom he is a representative;(b) disclose his licence/ certificate to the prospect on demand;(c) disseminate the requisite information in respect of insurance products offered for sale by his insurer and take into account the needs of the prospect while recommending a specific insurance plan;(d) disclose the scales of commission in respect of the insurance product offered for sale;(e) indicate the premium to be charged by the insurer for the insurance product offered for sale;(f) explain to the prospect the nature of information required in the proposal form by the insurer, and also the importance of disclosure of material information in the purchase of an insurance contract;12. Renewal of License(1) Every license granted by the Authority to a Bancassurance agent or any renewal thereof, in terms of these regulations, shall remain in force for three years. (2)A license granted to a Bancassurance agent may be renewed for a further period of three years on submission of the application form along-with a renewal fee of rupees two hundred and fifty, at least thirty days prior to the date of expiry of the license.(3) The additional fees payable to the Authority, under the circumstances mentioned in sub-section (3) of section 42 of the Act, shall be rupees one hundred.(4) The Authority may, if it is satisfied that undue hardship would be caused otherwise, accept any application after the license ceased to remain in force, on the payment by the applicant of a payment of rupees seven hundred and fifty as additional fee.(5) Every certificate granted to the specified person shall remain in force for a period of three years which can be renewed for a further period of three years on submission of an application form accompanied by fees of rupees one hundred, provided that the license of the Bancassurance agent continues to be valid. The application form along with the fees shall be submitted at least thirty days prior to the date of expiry.(6) The specified person on his ceasing to be an employee of the Bancassurance agent shall surrender his certificate to the designated person. If he desires to become an individual insurance agent then he shall follow the procedure as laid down in Insurance Regulatory and Development Authoritys (Licensing of Insurance Agents) Regulations, 2000.(7) A specified person shall also be governed by the provisions of sub-regulation (3) and stated above.13. Suspense and Cancellation of License/ certificate(1) Where a Bancassurance Agent or Chief Bancassurance Executive or a specified person which has been granted a license or a certificate, as the case may be, under these regulations,(a) Suffers at any time during the period of the license or certificate, as the case may be, from any of the disqualifications specified in sub-section (4) of section 42 of theAct(b) Fails to comply with any of the conditions subject to which the license or a certificate, as the case may be, has been granted;(c) Contravenes of any of the provisions of Act, the Insurance Regulatory and Development Act, 1999 (41 of 1999), the regulations framed thereunder and such other guidelines or directions issued by the Authority form time to time; or;(d) Fails to furnish any information relating to his activities as an bancassuracne agent as required by the Authority;(e) Furnishes wrong or false information, or conceals or fails to disclose material facts in the application submitted for obtaining a license(f) Does not submit periodical returns as required by the Authority(g) Fails to resolve the complaints of the policyholders or fails to give a satisfactory reply to the Authority in this behalf.(3) During the proceedings, the Bancassurance Agent or the Chief Bancassurance Executive or the specified person shall produce any record relating to the Insurance business in such form and within such time as may be ordered by the Authority14. Issue of duplicate license :The Authority may on payment of a fee of rupees fifty issue a duplicate licence to replace a licence, which is lost, destroyed, or mutilated.

Entering into Bancassurance

Ways of entering into bancassurance There is no single way of entering into bancassurance which is best for every insurer and every bank. As in all business situations, a proper strategic plan drafted according to the companys internal and external environmental analysis and the objectives of the organization is necessary before any decision is taken.

There are many ways of entering into bancassurance. The main scenarios are the following:

One partys distribution channels gain access to the client base of the otherparty. This is the simplest form of bancassurance, but can be a missed opportunity. If the two parties do not work together to make the most of the deal, Then there will be at best only minimum results and low protability for both parties.If, however, the bank and the insurance company enter into a distribution agreement, according to which the bank automatically passes on to a friendly insurance company all warm leads emanating from the banks client base, this can generate very protable income for both partners. The insurance company sales force, in particular usually only the most competent members of the sales force, sells its normal products to the banks clients. The cooperation has to be close to have a chance of success. For the bank the costs involved besides those for basic training of branch employees are relatively low.1. A bank signs a distribution agreement with an insurance company, under which the bank will act as their appointed representative. With proper implementation this arrangement can lead to satisfactory results for both partners, while the nancial investment required by the bank is relatively low. The products offered by the bank can be branded.2. A bank and an insurance company agree to have cross shareholdings between them. A member from each company might join the board of directors of the other company. The amount of interest aroused at board level and senior management level in each organization can inuence substantially the success of a bancassurance venture, especially under distribution agreements using multidistribution channels.3. A joint venture: this is the creation of a new insurance company by an existing bank and an existing insurance company.4. A bank wholly or partially acquires an insurance company. This is a major undertaking. The bank must carefully dene in detail the ideal prole of the targeted insurance company and make sure that the added benet it seeks will materialize.5. A bank starts from scratch by establishing a new insurance company wholly owned by the bank. For a bank to create an insurance subsidiary from scratch is a major undertaking as it involves a whole range of knowledge and skills which will need to be acquired. This approach can however be very protable for the bank, if it makes underwriting prots.6. A group owns a bank and an insurance company which agree to cooperate in a bancassurance venture. A key ingredient of the success of the bancassurance operation here is that the group management demonstrate strong commitment to achieving the benet.7. The acquisition (establishment) of a bank that is wholly or partially owned by an insurance company is also possible. In this case the main objective is usually to open the way for the insurance company to use the banks retail banking branches and gain access to valuable client information as well as to corporate clients, allowing the insurance company to tap into the lucrative market for company pension plans. Finally, it offers the insurance companys sales force bank product diversication (and vice versa). This form is used in many cases as a strategy by insurance companies in their effort not to lose their market share to bancassurers.

The best way of entering bancassurance depends on the strengths and weaknesses of the organization and on the availability of a suitable partner if the organization decides to involve a partner. Whatever the form of ownership, a very important factor for the success of a bancassurance venture is the inuence that one partys management has on that of the other. An empowered liaison between respective managements, with regular senior management contacts, as well as sufficient authority to take operational and marketing decisions, is vital. Regular senior management meetings are also a vital element for a successful operation. There must be a strong commitment from the top management to achieving the aims in the business plan.

UTILITIES OF BANCASSURANCE

FOR BANKS

1. 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. Atypical 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.

2. 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 Bancassurance-centric 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 setup 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.3. 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

1. Stiff Competition:At present there are 15 life insurance companies and 14general 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.2. 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.

3. 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.4. 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.5. 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 thedatabase of the banks middle income customers, there was a need felt for Bancassurance.

Benefits of BancassuranceThe company is targeting around 10%of the business during its startup phase. Bancassurance makes use of various distribution channels like salaried agents, bank employees, brokerage firms. Direct response, Interest etc. Insurance Companies have complementary strengths. In their natural and traditional roles Bancassurance if of great benefit to the customer. It leads to the creation of one- stop where a customer can apply for mortgages, pensions, savings and insurance products. The customer gains from both sides as costs get reduced. Bancassurance for the customer is a bonanza in terms of reducing charges, a high quality product and delivery at the doorstep. Both insurance companies and banks have certain competitive advantages.

Banks enjoy the following advantages over insurance companies.1. Public Trust:Most banks have strong brand name. The Bank's physical presence in the public areas is an added reassurance to the people. In an old - fashioned way, people like to see that the insurer remains within sight, over the years.Their relationship with their customer is based on trust.2. Ease in Distribution:Banks have a wide network of branches which constitute an excellent distribution channel.3. Free Customers:Banks own the financial transaction history of their customer. This allows them to build detailed profiles of every single customer using data management techniques. They can then devise individually tailored products to meet the specific needs of each customer, SBI Life, for example, is planning to go in for bancassurance. It has access to same 117 million Term Deposit holders, through 14,000 branches of the State Bank of India.4. Retail Marketing:Banks are also known for providing a complete range of services. A research study conducted among insurers revealed that around 33% of the respondents felt that retail customers were likely to buy multiple financial service product from Banks compared to this, less than 20% of the respondents felt that retail customer would approach insurers or brokers for purchasing such products.

Insurance Companies enjoy the following advantages The benefits to the insurers are equally convincing. The ability to tap into banks huge customer bases is a major incentive. The extensive customer base possessed by banks is considered to be ideal for the distribution of mass-market products. On the other hand, insurers can make use of the wide reach of bank customers to categorise potential clients in detail according to their needs and values. With increasing sophistication on bancassurance operations, some insurers can focus on the high-net-worth segment, which offers greater potential for wealth management business. Apart from the ability to tap into new customers groups, escaping from the high cost of captive agents is another reason prompting insurers to look into alternative channels. In some cases, teaming up with a strong bank can help to fund new business development and boster public confidence in the insurer.

a. In a nutshell, insurers are attracted to bancassurance because they can:i. Tap into a huge customer base of banks;ii. Reduce their reliance on traditional agents by making use of the various channels owned by banks;iii. Share services with banks;iv. Develop new financial products more efficiently in collaboration with their bank partners;v. Establish market presence rapidly without the need to build up a network of agents;vi. Obtain additional capital from banks to improve their solvency and expand business.There are different organizational structures under which banks can work together with insurers, including distribution agreements, joint ventures ore some integrated operations. It is then only logical to presume that different motivations will drive the choice of different organizational models.

Distribution channels in BancassuranceTraditionally, insurance products have been promoted and sold principally through agency systems in most countries. With new developments in consumers behaviors, evolution of technology and deregulation, new distribution channels have been developed successfully and rapidly in recent years. Bancassurers make use of various distribution channels:

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 his contract. Despite this limitation on control, career agents with suitable training, supervision and motivation can be highly productive and cost effective. Moreover their level of customer service is usually very high due to the renewal commissions, policy persistency bonuses, or other customer service-related awards paid to them.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/or 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. Banks refer complex insurance requirements to these advisors. 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:Having Salaried Agents has the advantages of them being fully under the control and supervision of bancassurers. These agents share the mission and objectives of the bancassurers. Salaried Agents in bancassurance are similar to their counterparts in traditional insurance companies and have the same characteristics as career agents. The only difference in terms of their remuneration is that they are paid on a salary basis and career agents receive incentive compensation based on their sales. Some bancassurers, concerned at the bad publicity which they have received as a result of their career agents concentrating heavily on sales at the expense of customer service, have changed their sales forces to salaried agent status.

Platform Bankers: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 and the representative being referred to may be a trained bank employee or a representative from the partner insurance company.Platform Bankers can usually sell simple products. However, the time which they can devote to insurance sales is limited, e.g. due to limited opening hours and to the need to perform other banking duties. A further 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.In many set-ups, the bank employees are assisted by the bank's financial advisers. In both cases, the bank employee establishes the contact to the client and usually sells the simple product whilst the more affluent clients are attended by the financial advisers of the bank which are in a position to sell the more complex products. The financial advisers either sell in the branch but some banks have also established mobile sales forces.

Set-up / Acquisition of agencies or brokerage firms:In the US, quite a number of banks cooperate with independent agencies or brokerage firms whilst in Japan or South Korea banks have founded corporate agencies. The advantage of such arrangements is the availability of specialists needed for complex insurance matters and -in the case of brokerage firms - the opportunity for the bank clients to receive offers not only from one insurance company but from a variety of companies. In addition, these sales channels are more conceived to serve the affluent bank client.

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 bancassurer 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. The reasonable expectation is that personal banking services will increasingly be delivered by Internet banking. Bancassurers can also feel confident that Internet banking will also prove an efficient vehicle for cross selling of insurance savings and protection products. It seems likely that a growing proportion of the affluent population, everyone's target market, will find banks with household name brands and proven skills in e-business a very acceptable source of non-banking products.There is now the Internet, which looms large as an effective source of information for financial product sales. Banks are well advised to make their new websites as interactive as possible, providing more than mere standard bank data and current rates. Functions requiring user input 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. Seminars in particular can be very effective because in a non-threatening atmosphere the insurance counselor can make a presentation to a small group of business people (such as the local chamber of commerce), field questions on the topic, then collect business cards. Adding this technique to his/her lead generation repertoire, an insurance counselor often cannot help but be successful.To make the overall sales effort pay anticipated benefits, insurers need to also help their bank partners determine what the hot buttons will be for attracting the attention of the reader of both direct and e-mail. 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. This includes the large regional bank and the small one-unit community bank. Distribution ModelsBancassurers have developed three basic distribution models: Integrative, Specialist and Financial Planning model. Integrative / Generalist Model:The integrative model distributes products through existing bank channels, and in its most well-known European version, branch bankers themselves sell insurance products to customers. Theoretically, this offers One Stop Banking and requires extensive training to branch staff. Bank staff are supposed to know the details of all the insurance products on offer. Telemarketing and direct mail are also examples of integrative approaches.

Specialist Model:The specialist model distributes investment or other complex insurance products through product experts who are generally employees or representatives of the insurance company. Platform bankers help identify prospects who are then contacted by an insurance professional. This process requires less training bur requires higher compensation to support the referral process. This model may not meet all of customers needs since it lengthens the process of sale of even a simple insurance product which can otherwise be sold across the counter. Financial Planning Model:The financial planning model is the only team approach. This method offers each customer and prospect a full financial planning package addressing all of the individual's financial concerns, risk tolerances and location in the cycle of life. This process is beneficial for the customer, the bank and the insurer, as the customer is viewed outside the numbers. Bancassurers convey the message that they want to know all about the customer in relation to their current and future financial needs and want to assist them on all those aspects of their life.To move a bank in the direction of becoming an effective user of the financial planning model, the banks sales force first has to be taught how to qualify prospects and make referrals and properly approach the customer/prospect. This process will include and actively involve the bancassurers project incharge who is best acquainted with pertinent federal and state regulations for the banks geographic market area.Insurers' bank partners must then learn how to spot existing depositors/borrowers' life triggers, i.e., milestones in a life that represent insurance opportunities. Although bank representatives have always done this in conjunction with bank products, it is new to them to apply this concept to insurance products as well. In general, a well-trained sales person can always count on certain life triggers -birth, death, divorce, career change or other catastrophic eventto lead his or her regular bank customers to new insurance products. If the banks personnel are shown how to capitalize upon these triggers using insurance products, they will automatically provide referrals to the insurance group and insurance sales will follow. Recommendations to Improve/Implement BancassuranceThe Bancassurance is a vital channel for selling of insurance products in diverse areas. But to implement it in a more effective way, following suggestions are required to follow the implementation of Bancassurance:

Related to Banking Sectori. Multi Communication and distribution channels have to be used to create awareness and sell the insurance products to the customers.ii. Information should be published in the multi language for better information dissemination.iii. Dissemination of information about Bancassurance on bank website is required.iv. Corporate Agency Model should be used by the banks to work better in Bancassurance.v. Bancassurance should be restored to Forensic Audit to investigate that there should not be any compelling on the customers to buy any Bnacassurance products.vi. 24 hour customer service should be provided to handle all the queries, complaints regarding insurance products.vii. Online Bancassurance should be provided so that the customer can get the information regarding policy, premium, surrender value etc.viii. Banks should market the insurance products along with loan so that the risk can be minimized.ix. Specialized and expertise knowledge personnel should be appointed in the banks to deal with insurance products.

Related to Insurance Companiesi. The coordination among Insurance Companies and the banks should be dealt with transparency and efficiency so that contradictions can be avoided.ii. The Insurance Company should provide the insurance products training to Bank staff.iii. Claim by the insurance company should be settled transparently so that rely of customer can be availed of. iv. The Insurance Company should also be disseminate the information about the Bancassurance on their websites and also in diverse languages. Related to Government and other Agenciesi. RBI and IRDA must work in coordination to promote Bancassurance so that contradictory guidelines should not create confusions.ii. Subsidiaries of the Commercial Banks should be allowed to enter Bancassurance.iii. Insurance Companies should be allowed to sell banking products.iv. Government should educate the population regarding the head of insurance for risk mitigation.v. Awareness programmers should be organized through point and electronic medias like PRESS, TV etc in diverse areas.

Challenges in BancassuranceIncreasing sales of non-life products, to the extent those risks areretained by the banks, require sophisticated products and risk management. The sale of non-life products should be weighted against the higher cost of servicing those policies.

1. 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.2. Human Resource Management has experienced some difficulty dueto 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.3. Private sector insurance firms are finding change management int he 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. So because of this there is distinction created between public and private sector banks.4. The banks also have fear that at some point of time the insurance partner may end up cross-selling banking products to their policyholders. If the insurer is selling the products by agents as well as banks, there is a possibility of conflict if both the banks and the agent target the same customers.

SWOT Analysis of Bancassurance

Strengths Accurate Customer DetailsThe accuracy in customer details can do wonders. The data generated by many sources lacks accuracy. But the accuracy of data is very high in bancassurance. This helps in targeting right segment of customers for right policy. The communication address and phone number of customers are updated on time and avoids waste of time and resources in communication.

Insurance Is Mandatory For LoansThe bank whenever offers loan bound to issue appropriate class of insurance too. It is legally mandatory for a bank to club loan products with relevant insurance. For example, life insurance is required for personal loan. In case of property insurance, fire insurance is mandatory. Similarly, for different classes such as cattle insurance, Agri insurance etc demanded while selling the loan products for the same.

Customized Policies at Lower PremiumThe insurance policies are customized for bancassurance channel. The statistical analysis of customer data helps to devise right set of policies for different customers. The features and premium of insurance products designed for bancassurance channel comparatively better than any other channel. In fact, the insurance policies are lucrative in bancassurance channel.

Issuance of Very Special Class InsuranceThe risky class of businesses will not be issued as it affects the profit of the insurer. Some of the risky classes are weather insurance, cattle insurance etc. if the customer approaches through bacassurance channel then the policies will be issued. In other words, the risky policies are issued only bancassurance customer and not for others.

Good Numbers of Leads to Cross SellThe bank customers can be targeted to sell insurance policies. The existing customer database can be used to generate leads. As the number of sales leads increase the sale closures also increases. Thus the more leads ends in more sale closure. The banks can cross-sell insurance policies to its customers.

Services Under One Roof for CustomersThe customer can enjoy convenience of core banking products and insurance policies under one roof. Otherwise the customer needs to run around in search of different financial products to meet his needs time to time.

Relationship Based Business ModelThe insurance is considered as concept selling. The sales executive cannot expect immediate sale closure. Each phase of the sales process consumes time. The time taken to follow-up etc is lengthy. The success of insurance sales is purely based on relationship between the seller and the buyer. The bank employees can turn the rapport created as policies.

Important Source of IncomeThe fee-based services increase the productivity of the employee as well as the bank branch. The existing resources can be utilized to sell financial products. Otherwise the insurance company needs to spend on resources. It is easy to train the bank employees as they are graduates. Banks due to competition loses profit in core banking products and it can be compensated in selling insurance products.

Weaknesses Lack of Initiatives from Bank EmployeesThe bank employees should sell insurance in addition to their routine works. They perceive insurance as a burden on their head without considering its benefits. They are not interested in attending insurance training and suffer without product knowledge. The initiatives to create rapport with insurance company employees are minimal.

Dependency on insurer EmployeeThe bank employees are solely depending on bancassurance executive for sales. The sales executive can handhold in the initial time but not always. A bancassurance executive will be given handful of bank branches. It is difficult to manage and address all the requirements simultaneously.

Customer Orientation Is LessMost of the bank employees tend to sell the policies which can fetch maximum benefits for them in terms of commission volume. But they forget to fulfill the customer requirements. The bank employees are having profit orientation not customer orientation.

Can Only Promote Tie-Up Insurer ProductsAs per IRDA guidelines, an insurer can have tie-up with any number of insurers. But a bank can have tie-up with only one life insurer and one non-life insurer. Thus a bank is restricted to sell only one bank products and cannot sell multiple insurers products simultaneously.

Opportunities Growing Channel of MarketingThe bancassurance generates significant proportion of premium for any insurer. The bancassuance is inevitable as it generates huge premium next to agency channel. The growth rate of bancassurance channel is exponential in recent years.

Dual Support ModelThe customer who takes the insurance policy through bancassurance channel is expected to enjoy dual support. In other words, support from bank as well as insurance company. The scope for better customer services is higher in bancassurance.

Tax Payers Can Be TargetedEvery year during March, the sale of life insurance reaches its peak. At that time selected customers (preferably tax payers) can be targeted for single premium policies. In a nutshell the bank employees should be prepared to allot time for insurance in March.

Sales Can Be Driven By New CampaignsThe insurers can devise new campaign to motivate bank employees for selling the insurance policies. The winner of each campaign can be awarded with foreign tour, gold, cash prizes etc. thus the inner urge to sell more and win can be increased.

Scope of Premium Payment through EMIsAs per IRDA regulations, the premium for non-life insurance cannot be paid in installments. But the banks can pay the premium to insurer on behalf of the customer and can collect premium from customers in installments. Thus the bank can extend the comfort of premium installments to its customers.

Threats Insurance Becomes Additional ResponsibilityThe bank employees should sell insurance in addition to core banking activities. During the introductory phase the burden will be extreme for them. But the bank employee will be more comfortable in selling insurance as the time progresses. The friction is more in the initial phase of the bancassurance tie-up. Those successfully completes the first phase can really excel in selling insurance.

Rapport Maintenance between EmployeesThe rapport between bank employee and sale executive is affected by variety of factors. Some of the important factors are: the initiatives taken by bank employees and executive, meticulous planning and allocation of time for selling insurance, the number of branches under the supervision of executive etc. for example, if an executive is allotted with more number of banks then the rapport level with each bank employee is limited due to lack of time.

Brand Equity and Poor ServiceGenerally, out of bancassurance tie-up, the brand equity of the insurer is improved. But the poor insurance service may dilute the bank brand equity. So the bank needs to analyze the insurer carefully before tie-up. Otherwise poor insurance service may hinder the sale of core banking products.

Competitive Quotes from OthersSometimes, the premium quote of other channels is comparatively lower than the bancassurance channel. More specifically, the direct marketing motor premium is cheapest one. In such cases, the customer prefers to buy from the channel which charges the lowest premium.

New Bancassurance ProposalsThe bancassurance channel has limited contractual term and can be renewed subsequently. Generally, each bank receives invitation from insurer to become bancassurance channel partner. If bank gets profitable contract than the current one then the present tie-up will come to an end.

Banks and NBFCs have varying degree of life insurance distribution.

Motor Insurance is the top selling General Insurance product through Banks and NBFCs

93% of the life Insurance companies are using Bancassurance channel.

Conclusion The creation of Bancassurance operations has a material impact on the financial services industry at large. Banks, insurance companies and traditional fund management houses are converging towards a model of global retail financial institution offering a wide array of products. It leads to the creation of 'one-stoper shop' where a customer can apply for mortgages, pensions, savings and insurance products. With huge untapped market, insurance sector is likely to witness a lot of activity - be it product innovation or distribution channel mix. Bancassurance, the emerging distribution channel for the insurers, will have a large impact on Indian financial services industry. Traditional methods of distributing financial services would be challenged and innovative, customized products would emerge.Discovery comes from looking at the same thing as everyone else but seeing something different. Banks' desire to increase fee income has them looking at insurance. Insurance carriers and banks can become part of the vision through strategic partnerships.

Bancassurance ArticlesRoyal Sundaram Alliance Insurance enters into bancassurance; ties up with DBS BankAug 6, 2014,

MUMBAI: Royal Sundaram Alliance Insurance today said it has joined hands with DBS Bank India for distributing general insurance policies to customers of the bank."About 13-15 per cent of our total business comes through bancassurance channel. We expect to leverage customer mix constituted by the high-net worth customers and corporate clients of DBS Bank to grow this channel further.We are happy to establish this tie up as our customer centric approach is in line with the DBS Bank's customer philosophy," Royal Sundaram Alliance Insurance Managing Director Ajay Bimbhet said.A Memorandum of Understanding was signed where DBS would introduce the products of Royal Sundaram in all its branches, the company said in a release."This partnership with Royal Sundaram Alliance Insurance Company is an important milestone for us, as bancassurance is a significant part of our growth strategy. We are constantly exploring opportunities to offer superior products to our customers across our 12 branches...," DBS India Managing Director and Head of Consumer Banking Rahul Johri said.Through this partnership Royal Sundaram will offer customised suite of high-end retail products and exhaustive commercial products and risk management knowledge to its commercial clients of DBS Bank.Bancassurance is a significant distribution channel in General Insurance Industry in India contributing to about 15 per cent of the total General Insurance business.The total Gross Written Premium ( GWP) for the Indian general insurance industry stands at around Rs 70,000 crore with annual growth of around 20 per cent.Large variety of banks and their extensive branch networks are increasingly being utilised to serve the insurance needs of over 400 million bank customers.Royal Sundaram Alliance Insurance Company is a joint venture between Sundaram Finance and Royal and Sun Alliance Insurance plc, UK.

Bancassurance: Govt's decision on cross-selling by PSBs could have been more nuanced

The government directive to public sector banks (PSBs) to mandatorily offer broking services and sell products of more than one insurance company to customers from January 2014 is controversial, without properly appreciating the issues and ground realities of cross-selling at PSBs.No one disputes the fact that PSBs can play a huge role in enhancing insurance penetration in the country. With over 400 million customer accounts, PSBs have barely achieved 1% insurance penetration.

They sell mostly saving-oriented policies, turning a blind eye to low-premium, low-commission term insurance, which is a vital social security tool for vulnerable segments. Insurance selling is confined to urban and city branches, with little awareness in the rural network.On the non-life side, banks are simply unaware of the nuances of various insurance products and their risk mitigation benefits, especially for the millions of SME clients.The bulk of bancassurance business is currently sourced by insurers with help from their sales staff deployed at bank branches. The number of bank personnel trained to sell insurance with the knowledge of what is good for customers and what is not is minuscule.Despite insurers' efforts, the persistency rate of bancassurance a measure of insured customers paying renewal premium is poor, at about 50% in some PSBs, a poor reflection of their post-sale follow up.The key reason for the state of affairs is lack of cross-selling culture in PSBs. With years of social banking orientation, bank managements find it tough to create a new business culture that aims to look at the customer's wallet in an integrated manner. In PSBs, the internal reporting and performance evaluation are not geared to encourage cross-selling.As a result, they earn less than 1% of profits from distributing third-party products. PSBs attribute the reason to shortage of staff at various levels. True, there is a vacuum in most banks following large-scale retirements, and there are daunting issues of training many new recruits on banking aspects. It is, therefore, unrealistic to expect the frontline staff to become experts at suggesting insurance solutions for multiple insurers in the near future.While our extensive banking network should aid greater insurance penetration, this cannot be achieved by compelling all PSBs to become insurance brokers overnight. It has to be a nuanced exercise, with a supportive policy framework.First, make a distinction between banks that have consciously entered the insurance business through equity JVs, and others that have remained plain distributors. RBI has allowed only large banks the equity route, relying on their risk management and other capabilities. These banks should set an example by offering advice-based insurance solutions to customers for more than one insurer life, non-life and health through their network. This category should include both PSBs and private banks that have set up insurance ventures.Second, encourage such banks to recruit staff that would be only involved in cross-selling insurance, mutual funds and pension products. It is difficult to change the mindset of banking-trained staff to be broking-oriented, including on claim settlements.New recruits governed by different service conditions and intensively trained is the answer, and they should be allowed to switch to mainstream banking upon a successful track record in broking. PSBs had recruited such specialist staff in the 1980s for rural banking operations, and many of them became capable generalist bankers.

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Sr no.Name of the Book/ MagazineAuthor/CommitteeDateHeadingPage No.

a. Business Aspects in Banking And InsuranceO P AgarwalFebruary2011Bancassurance and Microfinance142

2. Journal of Insurance Institute of IndiaVineet AggarwalDecember2004Bancassurance Concept, Framework& Implementation.34

3. Insurance Regulatory and Development Authority (IRDA) Committee Report.Committee on BancassuranceJune 72011CHAPTER IBancassurance16

4. IRDA JournalMarch 2012Design to Deliver48

Webliography1. http://articles.economictimes.indiatimes.com/keyword/bancassurance,2. http://en.wikipedia.org/wiki/List_of_insurance_companies_in_India,3. http://www.towerswatson.com/en-IN/Insights/IC-Types/Survey-Research-Results/2010/05/India-Bancassurance-Benchmarking-Survey ,4. http://indianexpress.com/article/business/banking-and-finance/rbi-plan-to-turn-banks-into-insurance-brokers-bad-idea/,5. www.rbi.org.in,6. www.irda.gov.in/

Analysis of SurveyPopularity Of Bancassurance

Promotion Mode

ANNEXUREQuestionnaire to Bank Manager

Institution Name:___________________________________________________

1. In which year your branch started Bancassurance?

2. What types of Insurance products are sold by your bank?

Life Insurance General Insurance Both

3. Which Insurance product is sold more by your Bank?

Life Insurance General Insurance

4. Whom do you sell Bancassurance products more?

Corporate Businessman Individuals Others

5. Is Bancassurance popular in India?

Yes No

6. How your bank promote Bancassurance?

Educational seminar Mails Advertisement

Websites Others

7. Modes/Channels used to sell Insurance products?

Tele Marketing Internet Agents

Walk in Customers

8. Is Bancassurance profitable or not?

Yes No

9. Does focusing on Bancassurance creates deviation from core activities of bank?

Yes No

10. Does your Bank maintain different KYC norms for Bank and Insurance products?

Yes No

11. Annually how many policies are sold under Bancassurance?

1

Bancassurance- A win-win solution

BankInsurance Company Customer retention Revenue and channel diversification Satisfaction of more financial needs under the same roof Quality customer access Revenue diversification Quicker geographical reach More profitable resource utilisation Creation of brand equity Enriched work environment Leverage service synergies with Bank Establish sales orientated culture Establish a low cost acquisition channel