Chapter-1 Revisiting the Dimensions of Bancassurance...

Bankers’ and Customers’ Perspectives on Bancassurance in Punjab: A Study of Selected Public and Private Sector Banks

Revisiting the Dimensions of Bancassurance: Concept, History and Growth

Chapter-1

Revisiting the Dimensions of Bancassurance:

Concept, History and Growth

The macro economists’ in their theories assign financial institutions a key role to mobilize

saving into investment. As per Classical thoughts, investment of all the saving (if any) by

financial institutions is must to apply Say’s law of market in a monetary economy so as

supply may create its own demand and level of full employment and potential output in

economy can be attained. In contrast, investment and savings are integral components of

Keynesian model of income determination; investment appears on aggregate demand side,

whereas, savings appears on aggregate supply side. In his masterpiece, General Theory of

Employment Interest and Money (1936), the financial system has been assigned important

role via adding up additional capital sector.The Keynes’s approach to the role of financial

systems in monetary production economies isirreconcilable with Gurley and Shaw’s or any

other version of loanable funds theories thatalways postulate that saving and investment are

the ultimate determinants of supply of anddemand for credit and argue that the role of

financial systems is to facilitate the interactionbetween savers and investors. Thus, the

financial system has been characterized to be the nerve system of an economy that mobilize

the credit from surplus to deficit areas and helps to maintain equilibrium output growth of the

economy.

The financial system is a wider concept that consists of the money and capital

marketsof an economy. The Banking and insurance are important components of financial

system being participant in both of said markets; they act as both seller and buyer of financial

instrument.Thus, the growth of these sectors is must to ensure a robust growth to an economy

like India. In India, Banking and Insurance industries have changed rapidly in the changing

and challenging economic environment throughout the world (Chowdhary, 2004). In this

competitive and liberalized environment, everyone is trying to do better than others and

consequently the survival of the fittest has come into effect. This has given rise to new forms

of business wherein big financial institutions come together, integrate all of their strengths

and efforts and have created new means of marketing and promoting their products and

services. On the one hand it is thebanking sector which is competitive and on the other,is the



Insurance sector which has a lot of potential for growth.Indian Banking and Insurance sectors

are not an exception to the changing world. These changes were basically initiated in the

form of financial reforms. Various Financial Reforms that were undertaken as a result of

recommendations of Narasimham Committee have reshaped the financial landscape of India

all together.1

1.1 Banking Industry in India

A healthy banking system is essential for any economy striving to achieve good

growth and yet remain stable in an increasingly global business environment (ICMR,

2005).The Indian economy has emerged with remarkable rapidity from the slowdown caused

by the financial crisis of 2007-09. With growth in 2009-10 estimated at 7.4 percent by quick

estimates released on 31st March, 2011 and 8.6 percent as per the Advance Estimates of the

Central Statistics Office (CSO) released on Feb7th, 2011, the turnaround has been fast and

strong (Govt. of India, 2010-11).2India stands for the size and dynamism of service sector.

The share of services in India’s Gross Domestic product (GDP) at factor cost (at Current

prices) increased rapidly, from 30.5 percent in 1950-51 to 55.2 percent in 2009-10.India’s

growth is still continued to remain service led, with the highest contribution of 90 percent to

GDP growth during the year 2012-13 (RBI, 2012-13). The CSO classification of Service

sectors shows that financing, insurance, real estate and business services was one of the

largest sector contributing 16.7 percent of the National GDP in 2009-10(Govt. of India,

2010-11).3In the year 2012-13, Financing, insurance, real estate and business services have

contributed 18.7 percent to the real GDP (RBI, 2012-13).

The Indian banking system, with one of the largest banking networks in the world,

has witnessed a series of reforms, over the past few years like the deregulation of interest

rates, dilution of the government stake in public sector banks (PSBs), and the increased

participation of private sectorbanks4.The history of Indian Banking Industry dates back to

18th century. Firstly the General bank of India and Bank of Hindustan came in to existence.

Both of these Banks are now defunct. The oldest existing bank in India is State Bank of India

established as Bank of Bengal in 1806. Then many other banks like Allahabad bank and

Punjab National Bank came into existence. Reserve bank of India took the responsibility of

banking sector of India in the year 1935. In 1947, RBI was nationalized and was given

broader powers.



Nationalization phase of Indian banks was consisted of two stages. In 1969, fourteen

banks and in the year 1980, six more banks were nationalized. During early 1990s the then

Narasimha Rao government embarked on a policy of liberalization and gave licenses to the

number of private banks, came to be known as New Generation tech-savvy banks, which

included banks such as UTI Bank(now re-named as Axis Bank), ICICI Bank and HDFC

Bank. This move, along with the rapid growth in the economy of India, kick started the

banking sector in India, which has seen rapid growth with strong contribution from all the

three sectors of banks, namely, government banks, private banks and foreign banks5.

Currently, banking in India is generally fairly mature in terms of supply and product

range. In terms of quality of assets and capital adequacy, Indian banks are considered to have

clean, strong and transparent balance sheets relative to other banks in comparable economies

(Luthra, 2004).Gone are the Days, when banks used to earn interest income from the

difference between lending and borrowing rates charged to customers. Current market

conditions however, have put a strain on the interest income as cost of borrowing funds have

increased substantially and lending has become too competitive to provide worthwhile

interest income (Kumar, 2007). Due to which, over the last three decades, there has been a

phenomenal increase in the size, spread and activities undertaken by banks in India (Rawani

and Gupta, 2002). Most of the Indian banks have set up their subsidiaries through which they

are providing a wide range of specialized financial services like underwriting of equities and

bonds, venture capital financing, leasing etc.It has resulted in to transformation from

domestic banking to international banking. These changes were required because a growing

economy not only demands stronger and vibrant financial sector but also necessitates the

provision of more sophisticated and variety of financial and banking products and services

(Karunagaran, 2006).

Banks, in particular, stride into several new areas and offer innovative products, viz.,

merchant banking, lease and term finance, capital market / equity market related activities,

hire purchase, real estate finance and so on. Thus, present-day banks have become far more

diversified than ever before. Therefore, their entrance into insurance business is only a

natural corollary and is fully justified too, as ‘insurance’ is another financial service required

and desired by the bank’s customers6.And moreover Bancassurance income can be used to

partly offset the interest reduction in a competitive lending environment.



1.1.1 Reasons for Banks to enter into Insurance Business

In the post reforms, the financial sector has both domestic and foreign players, and

the dividing line between the banks and non-banking financial institutions’ activities had

considerably thinned down. Overlapping in one another’s functions/ areas has become more

common than exception. The direct upshot of these developments led to intensive

competition in the banking sector and which in turn had a strong bearing on the banks’ net

interest margin/spread (Karunagaran, 2006). In fact the emerging scenario is likely to bring

down the banks’ spread even thinner.

Table 1.1 shows that the spread ratio has considerably come down cutting across all

the banking groups. For the Banking system (all Scheduled commercial Banks) spread ratio

decelerated from 3.01 percent at end of March 2001 to 2.79 per cent at end of March 2013. In

case of nationalized commercial banks spread ratio decelerated from 3.08 percent at end of

March 2001 to 2.39 per cent at end of March 2013. Foreign banks are not an exception to it,

they registered a decline in spread ratio from 4.01 per cent at the end of March 2001 to 3.89

per cent at the end of March 2013.Therefore banks were compelled to constantly look for a

stable alternate sources of earnings in the form of non- traditional and fee based sources of

incomes. In addition to it,many factors likeliberalization level of Non- performing assets,

widening of financial services, problem of overstaffing, problem to maintain a good repo,

customer retention, optimization of infrastructure costs, need to satisfy the risk related needs

of the customers, which were considered to be strong determinants for banks for entering into

insurance business (Chawla and Singh, 2007; Muntaquaand Samad, 2008).

Table1.1: Interest Spread of Different Bank Groups in India

Banks Years

2001 2013

SBI & its Associates 3.01 2.98

Nationalized Commercial Banks 3.08 2.39

Foreign Banks 4.01 3.89

Total banking System * 3.08 2.79

Note: *includes all Scheduled Commercial banks

Source: RBI Publications, Statistical Tables relating to Banking System in India.



1.2.Indian Insurance Industry

The insurance service as a financial service is considered to be one of the important

segments in an economy, for its growth and development. More than 185 years old Indian

Insurance industry has witnessed many phases of ups and downs from the days, when there

were many private sector companies initially and then moved to nationalization and again to

privatization (Singh and Kumar, 2005).So, the Indian Insurance industry underwent a drastic

transformation with the entry of private players, share thanks to the deregulation of industry

(Pardeshi, 2009).

Table 1.2: Number of Registered Insurers in India (As on 30th September,2013)

Type of Business Public Sector Private Sector Total

Life Insurance 1 23 24

General Insurance 6* 21** 27

Reinsurance 1 0 1

Total 8 44 52

Notes: i) * includes specialized insurance companies; and ii) ** includes three standalone health insurance companies and 1 general insurance company which was registered in 2010-11.

Source: IRDA, Annual Report 2012-13.

Following the enactment of the Insurance Regulatory and Development Authority Act

in 1999, India abandoned public sector exclusivity in the insurance industry in favor of

market-driven competition. This shift has brought about major changes to the industry. The

inauguration of a new era of insurance development has seen the entry of international

insurers, the proliferation of innovative products and distribution channels, and the rising of

supervisory standards.Since opening up, the number of participants in the industry has gone

up from six insurers in the year 2000 to 52 insurers as on September 2013. Of the 52

companies presently in operation, eight are in public sector. Out of these eight- two are

specialized insurers namely ECGC and AIC, one in life insurance namely, LIC and four in

non-life insurance and one in reinsurance namely GIC. Remaining forty four are in private

sector.Indian insurance industry is on the path of progress. Growth is evident from the figures

of Net profit and premium collected reported in the Table 1.3.During the financial year 2012-

13, the life insurance industry reported the net profit of Rs. 6948 Crores as againstRs. 31.95



lakhs in the year 2000-01. The total premium underwritten by the life insurance sector in

2012-13 was Rs.2, 87,202.49 Crores as against Rs. 36070.4 Crores in the year 2000-01.

Similarly Non-life insurance industry too has shown a spectacular growth registering a profit

of Rs. 3282 Crores in the year 2012-13 as against Rs. 355.14 Crores in the year 2000-01. The

total premium collected has increased fromRs. 10272.3 Crores in the year 2000-01 to Rs.

62972.82 Crores in the year 2012-13.

Table 1.3: Net profit Earned and Net premium Collected by Life and Non-Life Insurers

Type of

Business

Net Profit Earned Net premium Collected

2000-01 2012-13 2000-01 2012-13

Life Insurance 31.95 Lakhs 6948 Crores 36070.4 Crores 287,202.49 Crores

Non –Life

Insurance

355.14 Crores 3282 Crores 10272.3 Crores 62972.82 Crores

Source: IRDA Annual Reports.

1.2.1 Indian Insurance in Global Scenario

Globally, the share of life insurance business in total premium is 56.88 percent, i.e.

2.03 percent globally. For India, the share of life insurance business in total insurance is very

high at 80.02 percent while the share of non-life business is small at 19.8 per cent. In life

insurance business, India is ranked 10th among 88 countries. India’s share in global life

insurance market was 2.03 percent. The non-life insurance sector witnessed a significant

growth of 10.25 percent during the year 2012. Its performance is far better when compared to

global non-life insurance premium, which expanded to meager 2.6 percent during the same

period. However the share of non-life insurance premium in global non-life insurance

premium is small at 0.66 percent; India has been ranked 19th in global non-life insurance

market (IRDA, 2012-13).

1.2.2 Insurance Density and Insurance Penetration in India

The measure of insurance penetration and density reflects the level of development of

insurance sector in a country. While insurance penetration is measured as the percentage of

insurance premium to GDP, insurance density is calculated as the ratio of premium to

population (per capita premium). Since opening up of Indian insurance sector for private

participation, India has reported increase in both insurance penetration and density. But, the



major contribution in the overall growth of industry is of life insurance sector.Table 1.4

provides insurance penetration and density figures for life, non-life and overall insurance

industry in India.

Table 1.4: Insurance Penetration and Density in India

Years Life Insurance Non- Life Insurance Industry (Total)

Densit

y

($)

Penetratio

n (

percent)

Densit

y ($)

Penetratio

n

( percent)

Densit

y

($)

Penetratio

n (

percent)

2001 9.10 2.15 2.4 0.56 11.5 2.71

2002 11.7 2.59 3.0 0.67 14.7 3.26

2003 12.9 2.26 3.5 0.62 16.4 2.88

2004 15.7 2.53 4.0 0.64 19.7 3.17

2005 18.3 2.53 4.4 0.61 22.7 3.14

2006 33.2 4.10 5.2 0.60 38.4 4.80

2007 40.4 4.00 6.2 0.60 46.6 4.70

2008 41.2 4.00 6.2 0.60 47.4 4.60

2009 47.7 4.60 6.7 0.60 54.3 5.20

2010 55.7 4.40 8.7 0.71 64.4 5.10

2011 49.0 3.40 10.0 0.70 59.0 4.10

2012 42.7 3.17 10.5 0.78 53.2 3.96

GrowthRate

s

15.46 3.89 12.78 1.38 15.14 3.59

Notes: i) Insurance Density is measured as ratio of premium (in US $) to total population; and ii) Insurance Penetration is measured as ratio of premium (in US $) to GDP (in US $)

Source- IRDA Annual Reports, Various issues

From visualization of the above table, it may be observed that the penetration in the

non-life insurance sector in the country remains near constant for the last 9 years at around

0.60 per cent with a significant increase in recent three years to 0.78 in year 2012. However,

an increase has been noticed in insurance density, which has increased from US $ 2.4 in 2001

to US $ 10.5 in 2012 with a compound growth of 12.78 percent. The penetration in life

insurance has increased from 9.10 in 2001 to 42.7 in 2012 and insurance density has

increased from 2.15 in 2001 to 3.17 in 2012. Thus, due to the said significant growth in life

insurance sector, the growth rates of insurance density and penetration are 15.14 and 3.59

percent, respectively.

Further, from the data of insurance density and penetration in the year 2012, if India

is compared internationally, Switzerland with US $ 7522.1 observed to be having highest



insurance density in the entire world. Among Asian countries, Japan tops at the ladder with

insurance density of US $ 5167.5; Japan also occupies second position in comparison to the

rest of the world. In addition to it, Taiwan is the country with highest insurance penetration

18.2 percent. Both of these measures suggest that India with insurance density US $ 42.7 and

insurance penetration of 3.96 percent is lacking far behind other countries of the world, in

other words all insurance companies have a lot of scope for present as well as future

business.

1.2.3.Scope of Insurance in Punjab: An Inter-state Comparison of Insurance Density

and Penetration

To analyze the scope of insurance in Punjab, an inter-state analysis of insurance

density and insurance penetration has been performed. Table 1.5 provides insurance

penetration and density for various states and union territories in India. From visualization of

the table, it can be observed that the union territory of Chandigarh tops among the cross

section with highest insurance penetration to the tune of 2.03 percent and highest insurance

density of Rs. 4862.8. The state of Goa has been ranked at 2nd position followed by union

territory of Delhi at third rank in terms of insurance penetration and state of Kerala in terms

of insurance density. The state of Arunachal Pradesh with 32nd rank has been observed to be

the worst performer in terms of insurance penetration while, Bihar has been observed to be

the worst performer with 32nd rank in terms of insurance density. Though some states

acquired better ranking in terms of insurance penetration and density, still the observed

figures are too low if compared internationally.

Further, in the comparison with all the states under evaluation, the state of Punjab is

lagging far behind at 24th rank with a low insurance penetration to the tune of 0.52 percent.

However, it has been observed to be at better rank of 15th in terms of insurance density with a

figure of premium Rs. 546 per person in the state. Thus, the analysis confirms the fact that

Punjab is lagging behind a number of states in terms of both insurance penetration and

insurance density. Therefore, there exists an ample scope of insurance in India in General and

in the state of Punjab in particular.



Table 1.5: Inter-state Variation in Insurance Penetration and Insurance Density (figures for year 2012-13)

State/Union Territory Insurance Penetration Rank Insurance Density Rank

Andeman&Nikobar 0.34 31 458.0 17

Andhra Pradesh 0.63 18 559.6 14

Arunachal Pradesh 0.27 32 229.9 29

Assam 0.98 7 449.9 18

Bihar 0.71 13 211.2 32

Chandigarh 2.03* 1 4862.8 1

Chhattisgarh 0.35 30 218.5 31

Delhi 0.91 8 1983.9 3

Goa 0.88* 2 2096.9 2

Gujarat 0.77* 4 714.2 8

Haryana 0.39 26 535.0 16

Himachal Pradesh 0.72 12 757.9 6

Jammu& Kashmir 0.59 21 345.3 21

Jharkhand 0.67 16 330.9 24

Karnataka 0.73 11 624.0 11

Kerala 0.88* 3 769.0 5

Madhya Pradesh 0.68 15 338.9 23

Maharashtra 0.80 10 975.0 4

Manipur 0.67 17 307.1 25

Meghalaya 0.39 27 239.6 28

Mizoram 0.39* 6 220.9 30

Nagaland 0.37 29 246.4 27

Orissa 0.58 22 357.4 20

Pondicherry 0.44 25 603.8 12

Punjab 0.52 24 546.0 15

Rajasthan 0.57* 5 342.3 22

Sikkim 0.39 28 639.7 10

Tamilnadu 0.58 23 596.8 13

Tripura 0.63 19 381.7 19

Uttar Pradesh 0.71 14 275.4 26

Uttrakhand 0.62 20 669.5 9

West Bengal 0.85 9 749.0 7

Notes:i) * represents that figure belongs to year 2011-12 as the data for year 2012-13 is not available; ii) Insurance penetration is percentage of premium collected (in Rs.) to state domestic product (in Rs.); and iii) Insurance density measured as ratio of premium (in Rs.) to population.

Source: IRDA Annual Report 2012-13.

1.2.4. Reasons for Insurance Companies for entering into Bancassurance

Insurance Industry in India, for a fairly long period relied, on the traditional agency

channel. Industry was completely monopolized by the public sector for decades. Due to the



absence of the competitive pressure, the zeal for discovering new distribution channels and

adopting aggressive marketing was not felt and it led to slow and rugged growth of insurance

sector. It was, with the entry of IRDA as a regulator, the privatization came in to fore. Thus

the insurance sector in India can be seen as a full circle from being an open competitive

market to nationalization and back to liberalized market again. All the private entities

plunged almost simultaneously with a very little spacing of time and the entire insurance

sector was exposed to stiff competition. This competition was further enhanced with the

entry of foreign insurance companies .So, other forms of channels viz. corporate brokers,

telemarketing, internet marketing were added on professional basis, in line with the

international practice to combat competition. But it was not enough to exploit the synergy in

context of India having the largest banking network and lower insurance density and

penetration(Karunagaran, 2006).So, the insurance industry has finally woken up from its long

slumber to an altogether new awakening. It is the rise of a new dawn that has brought with it,

ample opportunities. From innumerable insurers, to affordable and quality covers for the

consumer, from increase in distribution channels to incorporating information technology

measures, from net selling to bringing about increased transparency – it’s all there7. Now

individual agents are not only the channel for the companies for distribution of its

products.This has led to the emergence of new concept called “Bancassurance”.

1.3 Concept of Bancassurance

The “Bancassurance” is a term coined by combining two words bank and insurance,

connotes distribution of insurance products through banking channels. It is a provision of

insurance and banking products through a common distribution channel to a common client

base. It is also defined as “the ownership and channel integration of a bank and insurance

carrier, with the aim being to cross sell insurance and investment products through the bank

distribution network. Bancassurance encompasses terms such as ‘Allfinanz’ (in German),

‘Integrated financial services’ and ‘Assurebanking’ describes a package of financial services

that can fulfill both banking and insurance needs at the same time.

The Life Insurance Marketing and Research Association’s (LIMRA’s) insurance

dictionary defines Bancassurance as “the provision of Life insurance services by banks and

building societies”.



According to IRDA, ‘Bancassurance’ refers to banks acting as corporate agents for

insurers to distribute insurance products.” Literature on Bancassurance does not differentiate

if the Bancassurance refers to selling of life insurance products or non-life insurance

products. Accordingly, ‘Bancassurance’ is defined to mean banks dealing in insurance

products of both life and non-life type in any forms. It is also important to clarify that the

term Bancassurance does not just refer specifically to distribution alone. Other features, such

as legal, fiscal, cultural and/or behavioral aspects also form an integral part of the concept of

Bancassurance. The Bancassurance as a distribution strategy involves selling of insurance

products via branch network of banking organizations.Bancassurance is the common

factor that unites “an insurance arm with a banking arm” and the “basic rationale behind

bancassurance is to improve earnings of the bank by selling the products of one arm to the

customers of the other arm (IRDA, 2011).Thus, the creation of Bancassurance operation

has a material impact on the financial service industry at large. It leads to the creation of

‘One Stop Shop’ where a customer can apply for mortgages, pensions, savings and insurance

products.

1.3.1 History of Bancassurance

The development of bancassurance can be divided into three stages. In the first stage,

until 1980, banks were selling guaranties as insurance in the form of direct extension of their

banking activities. This service was not of selling insurance, as it is offered now days,

therefore this period can be named as a period where bankers did not sell insurance but they

acquired experience in this field.The second development phase began after1980, when

banks started offering services in the field of insurance to their clients. First sale of Life

insurance by banks was made in France. After that, during late 80’s unit linked and

investment linked policies were sold in developed European Countries. In the third phase,

which began in 1990, banks started selling non-life insurance services too, along with life

insurance policies (Krsticet al., 2011).

1.3.1.1 Bancassurance Development in European Market

Overall bancassurance accounts for more than 35 percent of sales in European life

insurance market and is one of the dominant distribution channels in a number of European

countries such as Belgium, France, Italy, Spain and Portugal (Chawla and Singh, 2008). The

two main models implemented in European Market are Integrated Model and Advise based



Model. In the Integrated Model (popular in Southern Europe), banking and insurance

activities are closely integrated, bank branch staff sells the insurance products and insurance

products are designed specifically to fit in with bank’s expertise and customer needs. In the

Advice based Model (popular in German and U.K.), dedicated insurance advisors sell

individual insurance products. Table 1.6 provides a brief history of bancassurance in various

countries other than India along with the regulatory process of bancassurance.

1.3.1.2 Bancassurance Development in Asia

The bancassurance in Asia has primarily grown slowly over the past 10 years; the

past 5 years have seen the particular development. Prior to Asian financial crisis in 1997, one

could find only a few scattered bancassurance operations. Basically, banks had been enjoying

the good times and were not interested in insurance. Also, the insurers were satisfied with

their traditional distribution channel. However, the financial crisis acted as a catalyst for

change (Chawla and Singh, 2008). Damaged balance sheets and increased competition forced

the banks to look into the new avenues of income. On the other hand, insurers got another

distribution channel to tap vast uninsured market of Asia.In Asia, there are two basic

approaches to partnership. At the one extreme, the bank acts as an agent to one or possibly

several insurers via a simple agency agreement, with the little integration of processes. At the

other extreme, an integrated bancassurer focuses on full customer relationship management,

providing a seamless process and retaining the opportunity with in the financial group. Two

Asian markets are of great interest due to their potential size i.e. China and India. In China,

the banks were initially allowed to adopt insurance on restrictive terms, but, later on,

insurance laws of the country were revised in the year 2003 to lift the restrictions.

1.3.1.3 Bancassurance in India

In India, the chapter of Bancassurance began with the announcement of a Joint

Venture between State Bank of India and Cardiff SA, on December 28th, 2000. SBI has long

harbored plans to become a universal bank; doing business in banking, insurance and

security. But it was waiting for the right partner. The entry of SBI was ground breaking for

several reasons. This was the first bank to enter into insurance. Secondly, even though the

regulators had said that banks would not be allowed to hold more than 50 percent of an

insurance company, the SBI was allowed to do so (with a promise that its share would be

eventually reduced). Ever since the entry of SBI, a number of other insurance companies



have declared their desire to combine hands with banking partners. In this process, both life

and non-life companies have tied up with the banks. Table 1.6 provides a brief history of

initiating bancassurance in various countries other than India along with their regulatory

process.

Table 1.6: Regulatory Process of Bancassurance in Some

Selected Countries Across the Globe

Country Regulatory Process

France The Bancassurance channel was introduced in 2000. The regulator exercises regular monitoring. Banks act as brokers for distribution of life insurance products.

United Kingdom The sale of insurance through banks was initiated in 2001. The regulator exercises regular monitoring through compliance visits etc. The sale of life insurance products by bank staff has been limited by regulatory constraints since authorized financial advisers who have obtained a minimum qualification can only sell most Investment-based products. Following the reform of the polarization regime, banks will have the possibility to become multi-tied distributors offering a range of products from different providers.

Philippines The Bancassurance channel was introduced in 2002.

Japan The Bancassurance channel was opened in 2001 and is fully de-regulated. Banks usually have non-exclusive distribution agreements with several companies, but the regulation imposes restrictions to protect consumers, respect privacy and security of data

Hong Kong The Bancassurance channel was introduced in 2001. Banks are allowed to tie up only with two life insurers. Sales control processes are generally conducted by the insurers themselves. The regulator conducts occasional onsite checks.

Malaysia The Bancassurance channel was introduced in 1996. Regulator monitors sales practices through fact-finding processes, mystery-shopping exercises etc. Fact-finding guidelines are part of regulatory guidelines.

Singapore The Bancassurance channel was introduced in 1992. Regulator monitors sales practices through mandatory fact finding processes, mystery shopping exercises etc.

Indonesia The Bancassurance channel was introduced in late 90s. The sales processes are governed through the central bank. Mystery shopping exercises are undertaken. The insurers file with the regulator, details of the arrangement entered into with the bank. Banks act as brokers for distribution of life insurance products.

South Korea The Bancassurance channel was introduced in 2003. There was phase-wise de-regulation process, and now is fully deregulated. The regulator keeps a check on sales practices through regular bank auditing procedures.

Source: Report of the Committee on Bancassurance, IRDA, 2011



1.3.2. Guidelines for Bancassurance

Following the issuance of Government of India Notification dated August 3, 2000,

specifying the “insurance” as a permissible form of business that could be undertaken by

banks under sec 6 (1) (o) of the Banking Regulation Act, 1949, RBI issued the guidelines for

Banks undertaking Insurance business vide RBI Circular Nos.

DNBC.(PD).CC.NO.13/02/.01/99-2000 and DBS.FID No. C-8/01.02.00/2001-2002. As per

the circulars, any scheduled commercial bank along with its subsidiaries would be permitted

to undertake insurance business as an agent of insurance companies on fee basis, without any

risk participation.

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 be 50 percent of the paid up capital of the company. On a selective basis, RBI

can permit the highest participation by a promoter initially, pending disinvestment of equity

within the prescribed period.

1.3.2.1 Eligibility Criteria

� The net worth of the Bank should not be less than 500 Crores;

� The CRAR of the Bank should not be less than 10 percent;

� The level of Non - Performing assets should be reasonable;

� The Bank should have net profits for the last three consecutive years and

� The track record of the subsidiaries, if any of the bank should be satisfactory.

� Where a foreign partner contributes 26 percent of the equity with the approval of

IRDA/FIPB more than one public/ private sector banks may be allowed to participate

in the equity of the insurance joint venture.

� Subsidiaries will not be allowed to join insurance company on risk basis.

� Banks which are not eligible for Joint venture can make investments up to 10 percent

of the Net worth of the bank or Rs. 50 Crores whichever is lower in the insurance

company for providing the infrastructure and services support. Such participation

shall be treated as investment and will be without any contingent liability.



� Banks would be required to take prior approval of RBI. The RBI while granting

permission will take care of the NPA’s of Banks. There should be Arm’s length

relationship between bank and insurance business.

� The banks need not to obtain the prior approval of RBI while undertaking insurance

business as an agent or referral arrangement without any risk participation subject to the

following conditions

� The banks should comply with IRDA regulations for acting as ‘composite corporate

agent’ or referral arrangement with insurance companies.

� The banks should not adopt any restrictive practice of forcing its customers to go in only

for a particular insurance company in respect of the assets financed by the bank. The

customers should be allowed to exercise their own choice.

� The banks desirous of entering into any referral arrangement, besides complying with

IRDA regulations, should also enter in to the agreement with the insurance company

concerned for allowing the use of its premises and making use of the existing

infrastructure of the bank. The agreement will be for three years initially and later on can

be extended according to the conditions with the approval of its board in case of private

banks and of the central government in case of public sector bank.

� As the participation by bank’s customer will be on purely voluntary bases, so it should be

stated in all publically 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 insurance products.

� The risk if any, involved in insurance agency / referral arrangement should not get

transferred to the business of the bank.

� Latest audited balance sheet will be used for reckoning the eligibility criteria

1.3.2.2.Bancassurance Models

The Bancassurance mutually benefits both banks and insurance companies. Various

models have been developed depending upon the level of integration and the importance

sought by the two players. Each model has its own merits and demerits. The good model is

that which optimally leverages the strengths of the partners across the activity chain; the

models adopted for the bancassurance may be classified under two heads namely, a)

Structural Classification; b) Product Based Classification.



a) Structural Classification

The structural classification consists of following types of models:

� Referral Model– In this model selected bank branches provides physical

infrastructure facilities to insurance companies for selling their products to bank

customers with adequate disclosures and transparency, and charging referral fee on

the basis of premium collected.This is the simplest form of Bancassurance Model as

bank does not take any risk, bank just allows the insurance company to have access to

the database of its customers and charges fee for the every insurance sold.

� Corporate Agency –The other form of non-risk participatory distribution channel is

that of ‘corporate agency’ where in the bank staff is trained to apprise and sell the

products to the customers. Here the bank as an institution acts as a corporate agent for

the insurance products for 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 (Karunagaran, 2006). This

model of Bancassurance worked well in US, because customers generally prefer to

purchase policies through broker banks that offer a wide range of products from

competing insurers (Swiss, Re 2007).

� Insurance as fully integrated financial service /Joint Ventures– Apart from the

above two, the fully integrated financial service involves more comprehensive and

intricate relationship between insurer and the bank, where the banks acquire stake in

the insurance companyand they act as fully universal by selling insurance products as

one of their routine operations. In Indian case, ICICI bank and HDFC bank in the

private sector and State bank of India in public sector have already taken a lead in

restoring to this type of Bancassurance model, and have acquired sizeable share in the

insurance market, also made a big stride within a short span of time.Internationally,

the fully integrated model has demonstrated superior performance (Krishnamurthy,

2003).

b). Product Based Classification

The bancassurance products can be sold on the basis of the nature of product as follows:

� Standalone Insurance products–in this case Bancassurance involves marketing of the

insurance products through referral or corporate agency without mixing the insurance



products with the products/services of the banks. Insurance is sold as one more item in

the menu of the products offered to the bank’s customers, however retaining their

respective brands of their own.

� Complimentaryproducts– with financial integration both within the country and

globally insurance is increasingly being viewed not just as a standalone product but as an

important item on the menu of financial products. It helps customers to create a portfolio

of financial assets and plan for their security and wellbeing (Karunagaran, 2006). This

strategy aims at blending of insurance products as a ‘value addition’ while promoting its

own products. Thus banks will be able to sell insurance as complementary products

without any additional efforts. Many banks in India, in recent years, has been

aggressively marketing credit and debit card where 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.

1.4 Recent Trends of Bancassurance in India

In India the concept of Bancassurance appears to be gaining ground rapidly both

through commission based arrangements and joint ventures between banks and insurance

companies (Baruya, 2004). Banks with their geographical spread and penetration in terms of

customer reach of all segments have emerged as viable source of distribution of insurance

products8. All most all the new entrants along with LIC and GIC have formed relationships

with several banking partners after the formation of the required regulation.

Table 1.7and 1.8shows various Public sector and Private sector banks and their tie –

ups with different life insurers and non-life insurance companies. Most of the public sector

banks are in tie –up with Life Insurance Corporation of India and are acting as corporate

agents. The SBI, Andhrabank, Bank of BarodaandIDBI bank are in Joint venture with the

insurance companies. The SBI was the first Indian Bank to enter into insurance market. In

India, the journey of Bancassurance began in Dec, 2000, whenthe State bank of India

announced a joint venture partnership with Cardiff SA; the insurance arm of BNP Paribas

Bank (Sinha, 2005).Andhra Bank has entered into Insurance joint venture with Bank of

Baroda and Legal & General. The stake of Andhra Bank is 30 percent, Bank of Baroda 44

percent and Legal & General 26 percent in the joint venture9.



Table 1.7: List of Public Sector Banks and their Tie –Ups (Information as per 2011-12)

Sr.

No. Name of the Bank

Tie Up With

Life Insurance Co. General Insurance Co.

1 Allahabad Bank Life insurance Corporation of India Ltd

Universal Sompo General Insurance Co. Ltd

2 Andhra Bank India First Life Insurance Co. United India Insurance Co. ltd

3 Bank of Baroda India First Life Insurance Co. National Insurance Co.

4 Bank of India Star Union life Insurance Co. National Insurance Co.

5 Bank of Maharashtra Life Insurance corporation of India United Insurance Co.

6 Canara Bank Canara HSBC Life Insurance Co. United India Insurance Co. ltd

7 Central Bank of India Life Insurance Corporation of India Ltd

New India Insurance Co. ltd

8 Corporation Bank Life Insurance Corporation of India Ltd

New India Insurance Co. ltd

9 Dena Bank Life Insurance Corporation of India Ltd

Oriental Insurance Co.

10 Indian Bank Life Insurance Corporation of India Ltd

United India Insurance Co. ltd

11 Indian Overseas Bank Life Insurance Corporation of India Ltd

Universal Sompo Insurance Co. ltd

12 Oriental Bank of Commerce

Life Insurance Corporation of India Ltd


13 Punjab & Sind Bank Aviva Life Insurance Co. Bajaj Allianz Insurance Co.

14 Punjab National Bank Life Insurance Corporation of India Ltd


15 Syndicate Bank Bajaj Allianz Life Insurance United India Insurance Co.

16 UCO Bank Life Insurance Corporation of India Ltd

Reliance Insurance Co.

17 Union Bank of India Star Union Dai-Ichi Life Insurance New India Assurance Co.

18 United bank of India Life Insurance Corp. of India Bajaj Allianz Insurance Co.

19 Vijaya Bank Life Insurance Co. General Insurance Co.

20 State Bank of India SBI life Insurance Ltd. New India Insurance Co.

21 State Bank of Bikaner and Jaipur

SBI Life Insurance Co. National Insurance Co.

22 State Bank of Mysore SBI Life insurance Co. National Insurance Co.

23 State Bank of Travancore

SBI Life insurance Co. United India Insurance Co. ltd

24 IDBI IDBI Fortis Life Insurance Bajaj Allianz insurance Co.

Note: The State Bank of Indore is not included in the list, since it is merged with SBI.

Source: Compiled from various Web Sites of the banks



Table 1.8: List of Private Sector Banks and their Tie –Ups (Information as per 2011-12)

Sr.

No.

Name of the Bank Tie Up With

Life Insurance Company General Insurance Company

1 City Union Bank Life Insurance Corporation of India Ltd

National Insurance Company ltd

2 ING Vyasya Bank ING Life Insurance company ICICI Lombard Insurance Company

3 TamilnadMercantile Bank ltd

Reliance Life Insurance Company

United India Insurance Company ltd

4 Dhanlakshmi Bank ltd Bajaj Allianz Life Insurance Company

Bajaj Allianz General Insurance Company.

5 Federal Bank ltd IDBI Federal Life Insurance Company

Bajaj Allianz General Insurance Company

6 Jammu & Kashmir Bank

Met Life Insurance Company Bajaj Allianz General Insurance company

7 Karnataka Bank Met Life Insurance Company Universal Sompo Insurance Company

8 KarurVysya Bank Birla Sun Life Insurance Company


9 Kotak Mahindra Bank Kotal Mahindra Life Insurance Company

Not deals with General Insurance

10 Lakshmi Vilas Bank Life Insurance Corporation of India Ltd


11 Nainital Bank ltd ING Vyasya Life Insurance Company

National Insurance Company ltd

12 Ratnakar Bank ltd Kotak Life Insurance Company


13 South Indian Bank Life Insurance Corporation of India Ltd


14 Axis Bank Max New York Life insurance Company


15 Development Credit Bank ltd.

Birla Sun Life Insurance Company

ICICI Lombard Insurance Company.

16 HDFC Bank ltd HDFC Life Insurance Company

HDFC ERGO Insurance Company

17 ICICI Bank ICICI Pru Insurance Company

ICICI Lombard Insurance Company.

18 Indusind Bank ltd Aviva Life Insurance Co. ltd Cholamandalam M S Gen Insurance Company

19 Yes Bank Max New York Life Insurance

Bajaj Allianz General insurance Company

Source: Compiled from various websites of banks



Table 1.8 shows the various Private Sector Banks and their tie-ups in India. The most

important feature of the table is the ‘natural partnerships’. Specifically, HDFC Life insurance

is tied withHDFC Bank, ICICI Prudential and ICICI Lombard is tied up with ICICI Bank,

Federal Bank is tied with IDBI Federal life Insurance.The IDBI and Federal bank are in joint

venture with Ageas, a multinational insurance giant based out of Europe, where the stake of

Ageas and Federal bank is 26 percent each and stake of IDBI is 48 percent10

Table 1.9 shows the growth in the contribution made by banks (Bancassurance

channel) in new business premium collected by insurance industry. It is evident from the

analysis of the table that the concept of Bancassurance is growing significantly in India.

Private Life insurers have gained a lot from this channel. The share of banks in the new

business premium and group business premium, procured by the private life insurers is

continuously rising; it is because of the fact that shopping for insurance from a bank is

associated with many advantages like customization, lower costs and payment choice to the

customers (Business Standard; April 22, 2011).Share of banks as a distribution channel in

individual premium collected by private insurers is continuously increasing;it hasincreased

from 16.58 percent in year 2006-07 to43.08 percent in the year 2012-13. The share of none

of other channel has increased at such a high rate. According to the industry estimate, more

than 25-30 percent of the industry’s business comes through Bancassurance route (Business

Standards; March 29, 2011).It shows the Bancassurance channel is gaining popularity day by

day. It is due to the cost saving to the insurance companies by opting Bancassurance as one

of their distribution channel. A study by Swiss Re (2002) shows that for insurers,

Bancassurance has resulted in cost saving of around 21 percent and revenue gain of around 5

percent (Financial express; June 14, 2011).

Previously, IRDA regulations allowed banks to sell insurance policy of only one life

and non-life insurer. But now the position has got changed. As per the recommendations of

the committee set up by the IRDA on Bancassurance, banks can rope in two partners each in

life insurance, non-life insurance (excluding health), health insurance, Export Credit

Guarantee Corporation and Agriculture Insurance Company of India (Business Standard;

June 8, 2011). For achieving higher insurance penetration and density, higher levels of policy

holder servicing and providing a proper regulating framework the committee hasmade arange

of recommendations (Financial Express; June 8, 2011). But, the bank backed insurance



Table 1.9: Share of various Distribution Channels in New Business Premium

Years Intermediaries Pvt. sector (%) LIC (%) Industry Total (%)

2006-07

Individual Agents 65.8 97.28 88.62

Banks 16.58 1.24 5.46

Others* 8.41 0.9 2.96

Brokers 1.05 0.34 0.54

Direct Selling 1.39 0 0.38

Referrals 6.77 0.24 2.04

Totals 100 100 100

2007-08


Banks 18.89 1.3 7.97

Others* 11.03 0.29 4.36

Brokers 1.5 0.05 0.6


Referrals 7.79 0 2.95

Totals 100 100 100

2008-09


Banks 20.78 1.7 9.69

Others* 10.92 0.49 4.86

Brokers 2 0.47 1.11


Referrals 9.27 0.03 3.9

Totals 100 100 100

2009-10


Banks 24.88 1.64 10.6

Others* 10.28 0.52 4.28

Brokers 3.44 0.09 1.38


Referrals 7.85 0.18 3.13

Totals 100 100 100 Contd….



Years Intermediaries Pvt. sector LIC Industry Total

2010-11


Banks 33.21 1.81 13.31

Others* 8.70 0.59 3.56

Brokers 4.77 0.04 1.77

Direct Selling 6.43 0.11 2.42

Referrals 2.34 0.23 1.01

Totals 100 100 100

2011-12


Banks 39.01 2.57 14.96

Others* 7.52 0.22 2.70

Brokers 5.07 0.04 1.75


Referrals 0.16 0.00 0.05

Totals 100 100 100

2012-13


Banks 43.08 3.16 16.18

Others* 6.04 0.15 2.07

Brokers 5.05 0.02 1.66


Referrals 0.10 - 0.03

Totals 100 100 100

Notes: i) New Business premium includes first year premium and single year premium; ii) The leads obtained through referral arrangements have been included in the respective channels; and iii) * represents any entity other than Banks but licensed as a Corporate Agent.

Source: Compiled from various Annual Reports of IRDA.



companies have opposed these regulations (Business Standard; June 16, 2011).

In addition to the growth of the share of banks in premium collection of insurance

companies, the income of banks has also increased at significant rate. Table 1.10 shows the

Income earned by various Public and Private sector Banks by selling insurance products in

their branches. Since, the disclosure regarding income earned from selling insurance was

made mandatory (by RBI) from the year 2009, hence the income data for three years 2009-

10, 2010-11 and 2011-12 have been presented here.

From Table 1.10, it can be observed that Bank of Baroda, a Public sector bank, has

been ranked at first place with 55.13 percent growth rate in insurance income during the

period under evaluation. It has been followed by Punjab National Bank, another Public sector

bank, with average annual growth rate of 45.24 percent. Among first five ranks, the

remaining three ranks have been occupied by the private sector banks namely, Axis Bank,

Federal Bank and INGVyasya Bank with 40.81, 27.37 and 26.95 percent annual growth in

insurance income. However, three laggard banks of sample are Dena Bank (rank 39), Andhra

Bank (rank 38) and syndicate bank (rank 37) with lowest growth rates of -85.89, -82.39 and -

56.26 percent, respectively. The largest Indian bank i.e., State Bank of India has even

witnessed a negative growth rate to the tune of -15.20 percent and therefore, ranked at 29th

place.

The analysis of Growth rates indicates that Private sector banks have performed better

than Public sector Banks. It is because of different cross selling practices followed by both

sectors. These differences emerged mainly because of their different philosophy, background

and distinct target customer segments. Hurdles faced by public sector banks include lack of

updated databases, no access to customer relationship management, lack of good network of

ATM’s , absence of formal training, lack of incentives, failure of synergy due to clash of

interest, role conflicts and problem of data integration. In case of private sector banks,

hurdles include improper contact management andnon-availability of training. Hence, it can

be laid down that both sectors can learn from each other. Public sector banks can introduce

specialized training and incentives whereas private sector banks need to introduce a control

mechanism and avoid indiscriminate cross-selling (Visa and Nigaguna, 2006).



Table 1.10: Income earned by Banks through Bancassurance

Sr.

No.

Name of the Bank

Bancassurance Income

(Rs. Crores)

Growth

Rate11

(%age)

Rank#

2009-10 2010-11 2011-12

Public Sector Banks

1 Allahabad bank 16.49 17.82 18.87 6.74 17

2 Andhra Bank 24.97 26.26 9.95 -82.39 38

3 Bank of Baroda 6.08 34.92 30.84 55.13 1

4 Bank of India 32.36 33.96 41.42 12.09 14

5 Bank of Maharashtra 4.33 5.75 7.22 25.53 6

6 Canara Bank 64.57 58.03 37.84 -28.50 33

7 Central Bank of India 15.51 15.73 19.83 11.76 15

8 Corporation Bank 7.72 7.68 8.31 3.60 19

9 Dena Bank 8.33 9.21 3.45 -85.89 39

10 Indian Bank 18.21 12.55 19.26 -5.31 26

11 Indian Overseas Bank 12.85 18.62 20.42 22.37 8

12 Oriental Bank of Commerce 34.82 36.99 18.14 -44.79 35

13 Punjab & Sind Bank 19.61 18.01 19.58 -0.43 21

14 Punjab National Bank 5.07 13.2 14.27 45.24 2

15 Syndicate Bank 16 7.05 7.50 -56.26 37

16 Uco Bank 10.18 11 8.17 -12.99 27

17 Union Bank of India 27 30 24.99 -4.95 25

18 United Bank of India 29.88 25.55 13.6 -44.18 34

19 State Bank of India 223.86 221.06 168.46 -15.20 29

20 State Bank of Bikaner and Jaipur 16.99 18.17 16.7 -1.15 22

21 State Bank of Hyderabad 40 26.47 16.23 -45.23 36

22 State Bank of Patiala 8.71 13.93 9.52 -4.60 24

23 State Bank of Travancore 11.12 19.17 10.84 -18.51 31

24 IDBI 22.93 37.86 34.44 16.59 12

Private Sector Banks

1 City Union Bank 2.75 3.00 3.25 8.35 16

2 ING Vyasya Bank 43.74 69.69 76.98 26.95 5

3 Federal Bank 10 12.62 17.31 27.37 4

4 Jammu and Kashmir Bank 30.6 20.04 22.65 -19.54 32

5 KarurVysya Bank 4.93 4.63 5.52 4.98 18

6 South Indian Bank 2.79 4.55 4.32 18.82 10

7 Axis Bank 125.09 229.37 289.95 40.81 3

8 Development Credit Bank 11.99 10.04 9.00 -14.41 28

9 HDFC 566.01 713.25 563.13 -3.03 23

10 ICICI 295.59 221.10 337.32 0.47 20

11 Indusind Bank 100.12 138.36 161.26 23.54 7

12 Yes Bank 11.12 12.81 14.84 14.43 13

13 Ratnakar Bank 1.52 1.78 2.23 19.12 9

14 Karnatka Bank 21.43 26.73 30.01 16.72 11

15 Kotak Mahindra Bank 32.09 23.05 22.89 -18.49 30

Notes: i)Figures are rounded off up to two decimal points; ii) the Banks for which no data was available, those were excluded from the list; and iii) # represents that the ranks have been assigned on the basis of growth rate.

Source: Various Issues of Annual Reports



1.5.Rationale, Objectives and Plan of Study

The Bancassurance is a long standing dream of offering a seamless service of

Banking, life and non-life insurance products.India, being the one of the most populous

countries of the world has an envious chain of bank branches, as a life line of its financial

systems. Banks can straightway leverage their existing capabilities, in terms of database and

face to face contact to market insurance products to generate some income for themselves,

which hitherto was not thought of (Neelamegam and Pushpaveni, 2008).Thus, Bancassurance

will help in exploiting the synergy in the context of India, having the largest banking network

coupled with lower insurance penetration and lower insurance density. The Public and

private sector banks together have a network of over 80,000 branches- 14000 metro, 16000

urban, 18000 semi-urban and 32000 rural branches and they can see value in insurance

business due to complementarily of products and can generate fee income from the

distribution of insurance products. India’s huge banking infrastructure is among the best

banking networks in the world. Currently, there are 17 banks with shareholding in insurance

companies and almost all banks are acting as corporate agents for insurance companies.

Cleary, it is something that would enable the insurance companies to capture the vast

untapped population.In simple words, it is aptly put that Bancassurance has promised, to

combine insurance companies’ competitive edge in the production of insurance products with

the banks’ edge in their distribution through their vast retail networks(Knight, 2006).

Further, the total premium collected through Bancassurance in 2009-10 was Rs.21947

Crores i.e. 7.31 percent of the total premium income of life and non-life insurance sectors put

together (Financial Express; June 14, 2011). Bancassurance have resulted in Cost saving of

around 21 percent and a revenue gain of 5 percent as the insurers had ready access to the

database of the banks. With the database of the banks, insurers have opportunity to cross sell

insurance products to each segment of banks’ customer base. Single premium structured

investment products to high net worth customers, unit linked plans to salaried and

endowment policies for middle income segment can be easily sold and can prove to be a gold

mine (Financial Express; June 14, 2011).

While the benefits of Bancassurance appear somewhat clear, prima facie to all

participants, the potential areas of conflict should not be glossed over. The success of the

partnership depends on the selection of ‘right model’. It is vital for this model to ensure that



banks remain fully committed to promoting and distributing insurance products. This

commitment has to come from both senior management in terms of strategic inputs and the

operational staff who would provide the front end for these products. There is also a need to

invest in IT and other support system that would provide an ‘integrated back end’ for

banking and insurance services. Regulatory issues need to be addressed comprehensively and

sorted out particularly with respect to competition and market structure problems (Abheek,

2004). In addition to it, the success of Bancassurance greatly hinges on banks ensuring

excellent customer relationship; therefore, the banks need to strive towards that direction.

Given the growth trajectory of the bancassurance, the concept of bancassurance will

be executed up to its optimum level if the bankers and customers have a positive attitude

toward it. However, a particular attitude towards or way of regarding something is called

perspective and the nature of attitude (positive or negative) can be revealed scientifically if

the perspective of the participants in a particular activity (viz. bancassurance) is analyzed

systematically. Thus, the present study has been carried to explore the customers’ and

bankers’ perspective on bancassurance. The study carries following objectives:

i) To study the extent and growth of Bancassurance in India;

ii) To analyze the impact of bancassurance on the performance of sampled banks;

iii) To analyze the extent and sources of awareness regarding bancassurance among bank

customers in Punjab;

iv) To explore the drivers of Cross buying intentions of bank customers in Punjab;

v) To analyze the level and sources of customer satisfaction; and

vi) To gauge the various motivational factors and hurdles for bankers selling insurance.

To attain the aforementioned objectives and test the set hypotheses, the analysis has been

divided into nine chapters. The present chapter is introductory one and revisits the concept

and growth of bancassurance in India. In the second chapter, depth of literature has been

analyzed via survey of existing studies on bancassurance. The third chapter offers a brief

introduction to the methodology used to test the set hypotheses. The analysis in fourth

chapter has been carried to test the impact of bancassurance on the technical efficiency

performance of Indian banking industry. The analysis in fifth chapter carries objective to

analyze the extent of awareness regarding the bancassurance among the customers of the

bank. The next chapter i.e., sixth chapter is an endeavor to analyze the drivers of cross-



buying intentions among bank customers. The chapter seven is an endeavor to analyze the

sources, levels and determinants of customers’ satisfaction from bancassurance. The analysis

of the bankers’ perspective on bancassurance is the prime objective of the chapter eight. The

last,chapter nine delineates the summary of all the empirical findings and concludes the

study along with deriving some important policy implications derived from the study.

*********************



Endnotes: 1Downloaded from <<http://www.gktoday.in/bank-po/understanding-bancassurance/>> dated July 17, 2012.

2Downloaded from <<http://www.indiabudget.nic.in/es2010-11/echap-01.pdf>>dated July 17, 2012.

3Downloaded from <<http://www.indiabudget.nic.in/es2010-11/echap-10.pdf>>dated July 17, 2012.

4 Downloaded from<<http://www.icmrindia.org/casestudies/catalogue/Business percent20Reports>>dated

August20, 2012.

5Downloaded from<<http://en.wikipedia.org/wiki/Banking_in_India>>dated August 20, 2012.

6Downloaded from <<http://www.scribd.com/doc/13453035/project-on-bancassurance>>dated January 4, 2012.

7 Downloaded from <<http://www.scribd.com/doc/47148990/project-on-bancassurance>>dated February 5,

2012.

8Downloaded from <<http://www.scribd.com/doc/47148990/project-on-bancassurance>>dated July 17, 2012.

9Downloaded from <<http://andhrabank.in/english/RetailInsurance.aspx>>dated June2, 2012.

10Downloaded from << http://www.federalbank.co.in/uploads/FinancialResults/Investor percent20Presentation

percent20- percent20Q1 percent20- percent20FY percent202010-11.pdf>>dated July 17, 2012.

11 The sample size is very small and thus, the regression techniques are not worth applying for calculating the

growth rates. Thus, index method has been used to compute growth rates. As per this step, following steps are

followed:

a) Assign index value (I) 100 to initial yeart;

b) In secondyear t+1 compute index value as It+1=It×[1+(ln(Yt+1/Yt)]

c) In third year t+2 compute index value as It+2=It+1×[1+(ln(Yt+2/Yt+1)]

d) Now compute ratio of indexes as follows: Rt+1=It+1/ItandRt+2=It+2/It+1

e) Find Geometric mean( GM) of Rt+1 and Rt+2;

f) To get growth rates use GR=(GM-1)×100.

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