PREFACE

OBJECTIVES
To present Bancassurance & how does it works.

To present 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

The methodology includes the information of the features of the

Bancassurance in the form of primary data that had been received from the
Branch Managers of the banks and the officers of the LIC. It also includes the
informations from the related books & the related websites.

. CHAPTER 1
HISTORY OF BANKING
IN INDIA.

HISTORY OF INSURANCE
IN INDIA.
 BANKING
1. Introduction:-
Banking has become a part and parcel of our day-to-day life.
Today, banks offer an easy access to a common man. They carry out
variety of functions apart from their main functions of accepting deposits
and lending. Banking is a service industry. Banks provide financial
services to the people, business and industries. Merchant banking,
money transfer, credit cards, ATM's are some of theimportant financial
services provided by the modern banks.
Indian banking system, over the years has gone through various
phrases after establishment of RBI in 1935 according to RBI Act,1934 ,
during British rule, to function as Central Bank of the country. Earlier
Central Bank's functions were being looked after by the Imperial Bank
of India.
The development of 'Banking is evolutionary in nature. There is no
single answer to the question of what is Banking. Because a bank
performs a multitude of functions and services which cannot be
comprehended into a single definition. For a common man, a bank is a
storehouse of money, for a businessman it is an institution of finance and
for a worker it may be a depository for his saving.
It may be explained in brief as "Banking is what a bank does". But
it is not clear enough to understand the subject in full The Oxford dictionary
defines a bank as "an establishment for the custody of money which it pays
out on a customer's order'. But this definition is also not enough, because
it considers the deposit lending andrepayment functions only. The
meaning of a bank can be understood only by its functions just as a tree is
known by its fruits, As any othersubjects, it has its own origin, growth and
development.

Evolution:-

It is interesting to trace the origin of the word Bank in the modern

sense to the German word "Banck" which means, heap or mound or
joint stock fund. From this, the Italian word "Banco" meaning heap of
money was coined.

Some people have the opinion that the words "bank is derived
from the French words, "bancus" or "banque" which means a "bench".
Initially the bankers, the Jews in Lombardy, transacted their business on
benches in the market place and bench resembled the banking counter.
 Development of Banking in India:-
Banking in India is indeed as old as Himalayas, but the banking
functions became an effective force only after the first decades of
20th century. To understand of the history of modem banking in India.
One has to refer to the English "Agency Houses" established by the East
India Company, These Agency Houses, were basically trading firms and
carrying on banking business as part of their main business. Because of
this dual functions and lack of their own capital they failed and vanished
from the scene during the third decade of 18 th century.

2. Meaning and Definition of banks:-

A bank is an institution which deals in money and [Link],
bank is an intermediary which handles other people's money both for
their advantage and to its own profit. But banks are not merely a trader
in money but also an important manufacturer of money. In other words, a
bank is a factory of credit.
According to 5(b) defines banking as "accepting for the purpose
of lending or investment of deposits of money from the public, repayable
on demand or otherwise and withdrawals by cheque, draft and order or
otherwise". Section 5 (1) (c) defines banking company as "Any company
which transacts the business of banking in India".
The Oxford Dictionary defines a bank as "an establishment for
the custody of money, which it pays out on a customer's order".
Section 5(c) of Banking Regulation Act,1949 has been defined
banking as,"One which transacts the business of banking which means
the accepting for the purpose of lending or investment of deposits of
money from the public, repayable on demand or otherwise and
withdrawable by cheque, draft, order or otherwise.
 Features of banking:-
The following are the essential features of banking,

(1) Dealing in money :-

The banks accept deposit from the public and advance them as
loans to the needy people. The deposits may be of different type
-current, fixed and savings accounts. The deposits are accepted on
various terms and conditions.

(2) Withdrawals Deposits:-

The deposits (other than fixed deposits) made by the public can be
withdrawals by cheques, draft or otherwise i.e. the bank issue and pays
cheques. The deposits are usually withdrawal on demand,

(3) Dealing with credit:-

The banks are the institutions that can create credit i.e. creation of
additional money for lending. Thus, creation of credit is the unique
feature of Banking

(4) Commercial in Nature:-

Since all the banking functions are carried on with the aim of
making profit, it is regarded as a commercial institution.

(5) Nature of an agent:-

Besides the basic functions of accepting deposits and lending
money as loans, banks possess the character of an agent because of its
various agency services.
4. Main Functions of Banks:-
The following are the main functions of banks
I. Accepting Deposits:-
Tapping the savings of the public by means of deposits in one of
the major functions of a bank. When a bank accepts deposits, it is said
to borrow money, as a borrower, the bank has to safeguard its position.
Therefore before opening an account a bank has to observe certain
general precautions. Every deposit is the property of the bank. The bank
is responsible for the safety of the deposit. A bank may its discretion in
allowing or not allowing a person to deposit and it cannot be questioned.
II. Lending Money:
Banking is essentially a business dealing with money. A bank has
to invest funds in different was to earn income. The bulk of income is
derived from lending funds, Banks provide loans and advances to
traders, industrialists against the security of some assets, They also
advance loans to the people on personal security. In both the cases the
banks run the risk of default in repayment. Therefore, the banks have to
follow a sound lending policy. Banks in India have responsibility of
fulfilling social obligations. Therefore, in order to protect their own
interest as well as national interest the following principles should be
followed by the banks.

INSURANCE
[Link]:-
Risk is there at every walk of life, risk also endangers life
itself. In the same way all financial deals, as well as possession of
money & property goods etc are fraught with the element of risk. For an
example, money may be stolen, or goods robbed or destroyed or an
employee may misappropriate. A man may be killed in an accident or
may die of a fatal disease. The loss arising out of these risks may be
quite substantial and in extreme cases, it may be so heavy that business
may be crippled. The businessman and the owners of the property
discovered that if they got together and contributed a relatively small
amount to a common pool, the total amount so contributed would be
sufficient to compensate any of them for the loss arising due to such
causes.
All risks do not actually occur at all times and hence it
imposable to calculate probable chances of any particular risk
materializing. It is quite that all the people do not face risks at the same
time, thus, the transfer of risk to another i.e. the insurer is in fact a
pooling of risks. If insurance did not exist, each individual would have to
bear the losses on his own. Insurance in effect means that each one in
the pool undertakes to bear a portion of the loss. Such an agreement
has proved to be advantageous to everyone as it is uncertain as to who
suffer the loss.
Insurance is a financial service for collecting the saving of
the public and proving them with risk coverage. The main function of
Insurance is to provide protection against the possible chances of
generating loss. It eliminates worries and miseries of losses by
 destruction of property and death. It also provides capital to the society
as the funds accumulated are invested in productive heads.

Principles of Insurance:-
An insurance contract made without due consideration to these
principles is treated as void, not enforceable by law these principles are
as follows:-

Principles of Utmost Good Faith:-

One of the basic & primary principles of insurance is utmost good
faith. It states that insurance contract must be made in absolute good
faith on the part of both the parties. The insured must give to the insurer
complete, true & correct information about the subject matter of the
insurance.
Material fact should not be hidden on any ground. This principle
is applicable to all types of insurance contracts. Insurance is for
protection & not for profit & hence correct information must be given to
the insurance company.

Principle of Insurable Interest:-

This principle suggests that the insured must have insurable
interest in the object of insurable. A person is said to have such interest
when the physical existence of the object of insurance gives him some
gain but which he is likely to lose by its non-existence.
In other words, the insured must suffer some kind of financial
loss by the damage to the subject matter of insurance. Ownership is the
most important test of insurance
interest. Every individual has insurable in his own life. Insurance
contracts without insurable interest are void, Insurable interest is not a
sentimental concepts but a pecuniary interest.
 Principle of Indemnity:-
This is one important principle of insurance, This principle
suggests that insurance contract is a contract for affording protection
and not for profit making. The purpose of insurance is to secure
compensation in care of loss or damage. Indemnity means security
against loss, The compensation will be paid in proportion to the loss
actually occurred. This amount of compensation in the insurance
contract is limited to the amount assured or the actual loss whichever is
less. The compensation will not be more or less than the actual loss.

Principle of Subrogation:-
This principle is an extension and a corollary of the principle of
indemnity. It is applicable to all the contracts of indemnity, It is applicable
to all rights and remedies which the assured would have enjoyed
regarding the said loss. When the compensation is paid for the total loss,
all the rights of the insured in respect of the subject matter of insurance
are transferred to the insurer. The assured will not realize more than the
actual loss suffered.

Principle of Contribution:-
There is no restriction as to the number of times the property can
be insured. But on the occurrence of the loss can be realized from one
insurer or all the insurers together, This principle is, however, not
applicable to life insurance contract.

Mitigation Loss:-
According to this principle every insured should all the necessary
steps to minimize the loss. E.g. if a trader takes out a marine policy for
the goods being shipped from Goa to Mumbai and if the storm takes
place due to which there takes might be risk of ship sinking. According to
this principle, the ship can be saved by throwing away some of the
goods in order to reduce the weight on the ship.

Risk must Attach:-

The subject matter should be exposed to risk, e.g. for goods
placed in godown marine, insurance policy cannot be taken. However,
goods may be insured against fire or theft.

Causa Proxima:-
The principle of causa proxima means that when a loss has been
caused by the series of causes, the proximate or the nearest cause
should be taken into consideration to determine the liability of the
insurer. The principle states that to ascertain whether the insurer is liable
for the loss or not, the proximate and not the remote cause must be
looked into. For an example, a cargo ship got a hole, due to negligence
of the master and as a result sea water entered and cargo was
damaged.

[Link] of contract of Insurance:-

Like other contracts, the contract of insurance has the
following

a) There must be an agreement between two parties who are

competent to enter into a contract.

b) The agreement must be in writing and the parties must give free
consent to terms and conditions.

c) The event must be subject to risk or otherwise it will amount to betting.

d) The event must also involve some element of uncertainty either as

regards in time or with respect to its occurrence,

e) The risk should not to very small.

f) The cost of insurance should not be prohibitive. Low cost can be

achieved if the number of risks insured is larger.

CHAPTER 2
ABOUT
BANCASSURANCE
 BANCASSURANCE
[Link]:-
What is Bancassurance?
Bancassurance, i.e., banc + assurance, refers to banks
selling the insurance products.
Official definition of Bancassurance: According to IRDA,
Bancassurance refers to banks acting as corporate agents for insurers
to distribute insurance products. Insurance Products include Life or Non-
Life products
Bancassurance in India is defined as those banks which are
dealing in insurance products of both life and non-life type in any forms.
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.

Birth of Bancassurance in India:

As per March 2008, the number of Insurance companies in India,
Life Insurance Companies 15 Private Insurance Companies
1 Public Insurance Company (LIC)
Non- life Insurance Companies 9 Private Insurance Companies
4 Public Insurance Company

As regarding the present size of the insurance market in India, it

is stated that India accounts not even one per cent of the
global insurance market. However, studies have pointed out that
 Indias insurance market is expected to grow rapidly in the next 10
years. Insurance industry in India for fairly a longer period relied heavily
on traditional agency (individual agents) distribution network, Therefore,
the zeal for discovering new channels of distribution and the aggressive
marketing strategies were totally absent and to an extent it was not felt
necessary.
As the insurance sector is poised for a rapid growth, in terms of
business as well as number of new entrants tough competition has
become inevitable. Consequently, addition of new and number of
distribution channels would become necessary.

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

Definition:-
Bancassurance in its simplest form is the distribution of insurance
products through the banks distribution channels. In concrete terms,
bancassurance which is known as All finance constitutes a package of
financial services that can fulfill both banking and insurance needs, at
the same time. The motives behind bancassurance also vary. For banks,
it is the means of product diversification and source of additional fee
income while Insurance companies see it, as a tool for increasing their
market penetration and premium turnover. The customer sees
bancassurance as a bonanza in terms of reduced price, high- quality
product and delivery at the doorsteps.

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,

[Link] 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
other
party. 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.
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.
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.
A joint venture: this is the creation of a new insurance company by an
existing bank and an existing insurance company.
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.
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.
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.
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.

[Link] Models
I. Structural Classification:

a) Referral Model:
Banks intending not to take risk could adopt referral
model wherein they merely part with their client data base for business
lead for commission. The actual transaction with the prospective client in
referral model is done by the staff of the insurance company either at the
premise of the bank or elsewhere. Referral model is nothing but a simple
arrangement, wherein the bank, while controlling access to the clients
data base, parts with only the business leads to the agents/ sales staff
insurance company for a referral fee or commission for every business
lead that was passed on. In fact a number of banks in India have already
resorted to this strategy to begin with. This model would be suitable for
almost all types of banks including the RRBs /cooperative banks and
even cooperative societies both in rural and urban. There is greater
scope in the medium term for this model. For, banks to begin with resorts
to this model and then move on to the other models.
b) Corporate Agency;
The other form of non-risk participatory distribution
channel is that of corporate agency, wherein the bank staff is trained
to appraise and sell the products to the customers. Here the bank as
an institution acts as corporate agent for the insurance products for
a fee/ commission. This seems to be more viable and appropriate
for most of the mid-sized banks in India as also the rate of
commission would be relatively higher than the referral arrangement.
This, 144 RESERVE BANK OF INDIA OCCASIONAL PAPERS however,
is prone to reputational risk of the marketing bank.
There are also practical difficulties in the form of
professional knowledge about the insurance products. Besides,
resistance from staff to handle totally new service/product could not be
ruled out. This could, however, be overcome by intensive training to
chosen staff packaged with proper incentives in the banks coupled with
selling of simple insurance products in the initial stage. This model is
best suited for majority of banks including some major urban
cooperative banks because neither there is sharing of risk nor does it
require huge investment in the form of infrastructure and yet could be
a good source of income.
Bajaj Allianz stated to have established a growth of 325
per cent during April September 2004, mainly due to bancassurance
strategy and around 40% of its new premiumsbusiness (Economic
Times, October 8, 2004). Interestingly, even in a developed country like
US, banks stated to have preferred to focus on the distribution channel
akin to corporate agency rather than underwriting business. Several
major US banks including WellsFargo, Wachovia and BB &T built a large
distribution network byacquiring insurance brokerage business. This
model ofbancassurance worked well in the US, because consumers
generallyprefer to purchase policies through broker banks that offer a
widerange of products from competing insurers (Sigma, 2006).

c) Insurance as Fully Integrated Financial Service/ Joint

ventures:
Apart from the above two, the fully integrated financial
service involves much more comprehensive and intricate relationship
between insurer and bank, where the bank functions as fully universal in
its operation and selling of insurance products is just one more
function within. Where banks will have a counter within sell/market
the insurance products as an internal part of its rest of the activities.
This includes banks having a wholly owned insurance subsidiary

With or without foreign participation. In Indian case, ICICI

bank and HDFC banks in private sector and State Bank of India in the
public sector, have already taken a lead in resorting 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.

II. Product-based Classification

A) Stand-alone Insurance Products:
In this case bancassurance involves marketing of
the insurance products through either referral arrangement or corporate
agency without mixing the insurance products with any of the banks own
products/ services. Insurance is sold as one more item in the menu of
products offered to the banks customer, however, the products of banks
and insurance will have their respective brands too, e.g., Karur Vysya
Bank Ltd selling of life insurance products of Birla Sun Insurance or non-
life insurance products of Bajaj Allianz General Insurance company.

B) Blend of Insurance with Bank Products:

With the financial integration both within the country
and globally, insurance is increasingly being viewed not just as a
stand alone product but as an important item on a menu of
financial products that helps consumers to blend and create a portfolio
of financial assets, manage their financial risks and plan for
their financial security and well being (Olson 2004). This strategy aims
at blending of insurance products as a value addition while promoting
its own products. Thus, banks could sell the insurance products without
any additional efforts. In most times, giving insurance cover at a nominal
premium/ fee or sometimes without explicit premium does act as an
added attraction to sell the banks own products, e.g., credit card,
housing loans, education loans, etc. Many banks in India, in recent
years, has been aggressively marketing credit and debit card business,
whereas the cardholders get the insurance cover for a nominal fee or
(implicitly included in the annual fee) free from explicit charges/
premium. Similarly the home loans / vehicle loans, etc., have also been
packaged with the insurance cover as an additional incentive.

III) Banks Referrals

There is also another method called 'Bank Referral'. Here

the banks do not issue the policies; they only give the database to the
insurance companies. The companies issue the policies and pay the
commission to them. That is called referral basis. In this method also
there is a win-win situation everywhere as the banks get commission,
the insurance companies get databases of the customers and the
customers get the benefits.

As already discussed, warm leads can provide a strong

competitive advantage for a bancassurance operation. An efficient
system for managing referrals of warm leads is therefore vital. This
section describes a process for managing referrals.

CHAPTER 3

UTILITIES
OF
BANCASSURANCE
 FOR BANKS
I) 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.

II) 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. The traditional products that the

III)Building close relations with the customers:

Increased competition also makes it difficult for
banks toretain their customers. Banassurance comes as a help in this
directionalso. Providing multiple services at one place to the customers
meansenhanced customer satisfaction. For example, through
bancassurance acustomer gets home loans along with insurance at one
single place as acombined product. Another important advantage that
bancassurance brings about in banks is development of sales culture in
their [Link], banking in India is mainly done in the 'brick and
mortar' model,which means that most of the customers still walk into the
bank [Link] enables the bank staff to have a personal contact
with their customers. In a typical Bancassurance model, the consumer
will haveaccess to a wider product mix - a rather comprehensive
financial services package, encompassing banking and insurance
products.
 FOR INSURANCE COMPANIES
I)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
oneanother. Even the oldest public insurance companies started facing
thetough competition. Hence in order to compete with each other and to
staya 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.

II)High cost of agents:

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

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

IV)Multi channel Distribution:

Now a days the insurance companies are trying to
exploit eachand every way to sell the insurance products. For this they
are usingvarious 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.

V)Targeting Middle income Customers:

In previous there was lack of awareness about
insurance. Theagents sold insurance policies to a more upscale client
base. Themiddle income group people got very less attention from the
[Link] through the venture with banks, the insurance companies
canrecapture much of the under served market. So in order to utilize
thedatabase of the banks middle income customers, there was a need
feltfor Bancassurance.

CHAPTER 4
REGULATIONS
FOR
BANCASSURANCE
IN
INDIA
[Link] 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 (see Note 1 below).

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
DevelopmentAuthority/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.
 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 consecutiveyears.

6. All banks entering into insurance business will be required toobtain

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.

CHAPTER 5
BENEFITS
OF
BANCASSURANCE
 Benefits of Bancassurance
The 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 abonanza 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) 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.
2) Their relationship with their customer is based on trust.
3) Banks have a wide network of branches which constitute an excellent
distribution channel.
4) 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.
5) Banks are also known for proving 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. Banks like Stan Chart have consolidated its
retail services under a super Mail, which takes care of personal service
finance needs like mutual funds, demat services and loans against shares.
For the bank, offering insurance products would just be another way of
extending the relationship with the retail consumer.
 Insurance Companies enjoy the following advantages over insurance
companies.

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.

In a nutshell, insurers are attracted to bancassurance because

they can:
- Tap into a huge customer base of banks;
- Reduce their reliance on traditional agents by making use of the
various channels owned by banks;
- Share services with banks;
- Develop new financial products more efficiently in collaboration with
their bank partners;
- Establish market presence rapidly without the need to build up a
network of agents;
- 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

Consumers :
Unlike with banks and insurers, where benefits of bancassurance will
have to be weighted against business risk, the positive impacts on
consumers are unequivocal. Part of the lowering of distribution costs will
be passed on to clients in the form of lower premium rates. In addition, it
is likely that new products will be developed to better suit client needs,
which otherwise may not be available if banks and insurers worked
 independently. Examples are overdraft insurance, depositors insurance
and other insurance covers sold in conjunction with existing bank
services. The convenience offered by bancassurance should also
increase customer satisfaction, for instance, when it is possible to pay
premium as well as to withdraw and repay
cash loans backed by life insurance policies through banks ATM s. Just
as important, is more than often a strategic step of financial service
providers to shift from being product-oriented and to focus on
distribution and customer relations.

Regulators
Bancassurance poses major challenges to regulators. The
ability of financial institutions to diversify into others sectors should help
to lower the level of latent systemic risk. Banks will benefit from lower
income volatility while insurers could potentially obtain additional capital
to bolster their solvency levels.

CHAPTER 6
DISTRIBUTION
CHANNELS
Distribution Channels
 Traditionally, insurance products were promoted and sold
principally through agency systems only. The reliance of
insuranceindustry was totally on the agents. Moreover with the monopoly
of public sector insurance companies there was very slow growth in
theinsurance sector because of lack of competition. The need for
innovativedistribution channels was not felt because all the companies
relied only upon the agents and aggressive marketing of the products
was also notdone. But with new developments in consumers
behaviours, evolution of technology and deregulation, new distribution
channels have beendeveloped successfully and rapidly in recent years.
Recently Bancassurers have been making use of variousdistribution
channels, they are:

1)Career Agents:
Career Agents are full-time commissioned sales
personnelholding an agency contract. They are generally considered to
beindependent contractors. Consequently an insurance company
canexercise control only over the activities of the agent which are
specifiedin the contract. Many bancassurers, however avoid this
channel, believingthat agents might oversell out of their interest in
quantity and not [Link] problems with career agents usually arise,
not due to the nature of this channel, but rather due to the use of
improperly designedremuneration and incentive packages.

2)Special Advisers:
Special Advisers are highly trained employees usually belonging to
the insurance partner, who distribute insurance productsto the bank's
corporate clients. The Clients mostly include affluent population who
require personalised and high quality service. UsuallySpecial advisors
are paid on a salary basis and they receive incentivecompensation
based on their sales.

3)Salaried Agents:
Salaried Agents are an advantage for the bancassurers
becausethey are under the control and supervision of bancassurers.
Theseagents share the mission and objectives of the bancassurers.
These aresimilar to career agents, the only difference is in terms of their
remuneration is that they are paid on a salary basis and career
agentsreceive incentive compensation based on their sales.

4)Bank Employees / Platform Banking:

Platform Bankers are bank employees who spot the
leads inthe 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. A restriction on theeffectiveness of bank employees in
generating insurance business isthat they have a limited target market,
i.e. those customers whoactually visit the branch during the opening
hours.

5)Corporate Agencies and Brokerage Firms:

There are a number of banks who cooperate with
independentagencies or brokerage firms while some other banks have
foundcorporate agencies.
The advantage of such arrangements is theavailability
of specialists needed for complex insurance matters andthrough these
arrangements the customers get good quality of services.

6)Direct Response:

In this channel no salesperson visits the customer to

induce asale and no face-to-face contact between consumer and seller
[Link] consumer purchases products directly from the bancassurer
byresponding to the company's advertisement, mailing or
telephoneoffers. This channel can be used for simple packaged products
whichcan be easily understood by the consumer without explanation

7)Internet:
Internet banking is already securely established as an
effectiveand profitable basis for conducting banking operations.
Bancassurers canfeel confident that Internet banking will also prove an
efficient vehicle for cross selling of insurance savings and protection
products. Functionsrequiring user input (check ordering, what-if
calculations, credit andaccount applications) should be immediately
added with links to theinsurer. Such an arrangement can also provide a
vehicle for insurancesales, service and leads.

8)E-Brokerage:
Banks can open or acquire an e-Brokerage arm and
sellinsurance products from multiple insurers. The changed
legislativeclimate across the world should help migration of
bancassurance inthis direction. The advantage of this medium is scale of
operation,strong brands, easy distribution and excellent synergy with the
internetcapabilities.

9)Outside Lead Generating Techniques;

One last method for developing bancassurance

eyesinvolves "outside" lead generating techniques, such as seminars,
directmail and statement inserts. Great opportunities await
bancassurance partners today and, in most cases, success or failure
depends on precisely how the process is developed and managed inside
eachfinancial institution.

CHAPTER 7
SBI Life Insurance
(profile)
Products offered
 SBI Life
Insurance (perspective)

State bank of India Life Insurance

SBI Life Insurance is a joint venture between theState
Bank of IndiaandCardif SAof France. SBI Life Insurance is registered
with anauthorized capital of Rs 1000 crore and a paid up capital of Rs
500crores. SBI owns 74% of the total capital and Cardif the remaining
26%.
State Bank of India enjoys the largest banking franchise
in [Link] with its 7 Associate Banks, SBI Group has the unrivalled
strengthof over 14,500 branches across the country, arguably the largest
in theworld. Cardif is a wholly owned subsidiary of BNP Paribas, which is
theEuro Zones leading Bank. BNP Paribas is one of the oldest foreign
bankswith a presence in India dating back to 1860. Cardif is ranked
2ndworldwide in creditors insurance offering protection to over 35 million
policyholders and net income in excess of Euro 1 billion. Cardif has also
been a pioneer in the art of selling insurance products
throughcommercial banks in France and in 35 more countries.
SBI Life Insurances mission is to emerge as the leading
companyoffering a comprehensive range of Life Insurance and pension
products atcompetitive prices, ensuring high standards of customer
service andworld class operating [Link] Life has a unique multi-
distributionmodel encompassing Bancassurance, Agency and Group
Corporate.
SBI Life extensively leverages the SBI Group as a
platform for cross-selling insurance products along with its numerous
banking product packages such as housing loans and personal loans.
SBIs access to over 100 million accounts across the country provides a
vibrant base for insurance penetration across every region and
economic strata in the country ensuring true financial [Link]
Channel, comprising of the most productive force of morethan 25,000
Insurance Advisors, offers door to door insurance solutions tocustomers.

Products Offered by SBI

Individual Products:

A)Unit Linked products:

1)SBI Life - Horizon II :

SBI Life-Horizon II is a unique, non participating

UnitLinked Insurance Plan in Indian Insurance Industry, where you need
to bea financial market expert. This plan offers the flexibility of Unit
LinkedPlan along with Automatic Asset Allocation which provides
relativelyhigher returns on your money where as increasing death
benefits provide higher security to your family

2)SBI Life - Unit Plus II :

This is a non participating individual unit linked
product. It provides unmatched flexibility to match the
changingrequirements. It provides choice of 5 investments funds in a
single policy

3)SBI life- unit plus child plan:

SBI LIFE understand you better and hence have
developedSBI Life - Unit Plus Child Plan to suit you and your needs
best. ThisPlan is meant for parents in the age group of 18-57 having a
child between the age group of 0-15 years.

B. Pension Products;
SBI Life - Horizon II Pension:
A unique Unit Linked Pension Plan that will enable
thecustomers to build a kitty good enough to enable them to spend a
peaceful and financially sound, retired life.
SBI Life - Horizon IIPension is a safe and hassle
free way to get high returns. It comeswith the unique feature of
Automatic Asset Allocation by means of which you truly, dont need to be
an expert to grow your money.

1) SBI Life - Unit Plus II Pension:

SBI Life understands the basic needs for pension
plan andgive the customers financial strength to maintain the life style
evenafter the retirement.
This is a unit linked pension plan wherein the
policyholder chooses an investment period from 5 to 52 years for
avesting age between 50 to 70 years. They can choose to pay either
single premium or pay regular premium for the entire policy [Link]
contributions are invested into 4 fund options as per their choice.

2)SBI Life - Lifelong Pensions:

It is a pension plan wherein the policyholder gets
theflexibility to meet the post retirement financial needs. It also
providestax benefits. The policyholder also has the option of withdrawing
alump sum amount up to particular limit.

3) SBI Life - Immediate Annuity:

SBI Life - Immediate Annuity Plan is introduced for
Pension Policyholders. This product provides annuity
paymentsimmediately from payment of purchase price. It has been
speciallydesigned to cater to the annuity needs of existing policyholders
(SBILife - Lifelong Pensions, SBI Life - Horizon II Pension, SBI Life -Unit
Plus II Pension) at the vesting age.

C) Pure Protection Products

1)SBI Life Swadhan;
This is a Traditional Term Assurance Policy with
guaranteedrefund of basic premium .Life cover is provided at no cost.
Tax benefitis also provided. There is also a rebate on high sum assured.
There isalso flexible benefit premium paying mode.

2)SBI Life Shield:

It offers the customers with the life insurance cover at
thelowest cost for a selected term. Tax benefit is also provided. There
isalso rebate on modes of premium payment.

3)SBI Life Shield as a Keyman Insurance Policy:

A Keyman insurance policy is taken to protect the
organizationagainst the reduction in profit resulting from the death of
theKeyman. As per IRDA circular only Pure Term Assurance
Productsmay be used as a Keyman Insurance. The SBI Life Insurance
provides SBI Life Shield as a Keyman Insurance Policy.

D)Protection cum Savings Products

1) SBI Life Sudarshan:
SBI Life - Sudarshan is an Endowment Policy designed
to provide savings and protection to the policyholder and their
[Link] can save regularly for the future. Thus at the end of the plan,
hewill receive a substantial amount of savings along with
theaccumulated bonuses declared. At the same time, his family will be
protected for death risk for the full Sum Assured.

2)SBI Life - Scholar II;

Twin benefit of saving for the child's education and
securing a bright future despite the uncertainties of [Link] to receive
theinstallments in lump sum at the due date of first installment of
Survival benefit.

E)Money back scheme products

1) SBI Life - Money Back :
It is a Traditional Saving Plan with added advantage of
lifecover and guaranteed cash inflow at regular intervals. The plan has
anumber of money back options specially suited to the customersneeds.
The cover is available at competitive premium rates.

2)SBI Life - Sanjeevan Supreme:

It is a Traditional Saving Plan which offers a life cover
for the term of the customers choice at the same time does not
burdenhim with liability to pay premiums for the entire term and also
provides cash flows at regular intervals.

SBI Life Insurance Company (perspective)

SBI Life insurance, a joint venture between State Bank of
India,the largest bank in the country and bancassurance major Cardiff of
France. SBIs stake in the venture is 74% whereas Cardiff has 26%
[Link] have launched many products so far incorporating certain
featuresthat are introduced for the first time in the country. SBI -Life is
bankingon the bancassurance model on the strength of the SBI Groups
10000 plus bank branches and its vast customer base. In addition it is
alsotapping other. banks corporate agents and the traditional agency
route to penetrate the insurance market SBI Life is planning to introduce
morenovel and user friendly products to cater to the requirements of
theconsumers in different segments.

SBI has the largest banking network in the county. The

bank islooking for business from every customer segment of the bank
rural andurban segments, upper, middle and lower income segments
/groups andcorporate segment. Besides their own channels they are
planning todistribute products through other interested banking channels
also. It isexpected that 2/3 rd of the premium income in expected to
come by way of bancassurance and the rest from the traditional agency
channel as wellas ties up with corporate agents (Sundaram Finance).
SBI has alsointroduced group insurance to some well managed
corporate staffs.

Technology is an integral part of this operation.

Cardiff provided the technology required. The project was initiated in
April 2004,and the initial roll-out was completed by August [Link] Life
hasimplemented an Internet-centric IT system with browser-based front-
office and back-office systems, channel management, policy
productdetails, online premium calculator and facility for group
insurancecustomers to view their individual savings status on the Web.
Theorganization has the facility to pay premiums through credit cards,
Net banking, standing instructions, etc. This is fully integrated with the
coresystems through industry standards such as XML, EDI, [Link] as
it plans to scale up operations shortly, SBI LifeInsurance Company Ltd is
looking at tripling its gross premium incomein the new financial [Link]
2007-08, SBI Life earned a total premiumincome of Rs 5,622 crore, of
which income from new policy sales was Rs4,800 crore. For the current
financial year, their target is to achieve a total premium income of Rs
10,500 crore and a first year premium income of Rs 8,500 crore. The
SBI Life ranks second in terms of market shareamong private life
insurers in the country.
SBI Life Insurance Company is the first among the 14
lifeinsurance companies in the private sector to post a net profit in 2005-
[Link] are life insurance players much more aggressive than SBI and
theyhave still not been able to break the record of SBI. Their success
islargely on the channel strategy and product strategy. The another
aspect istheir superior investment performance. They have consistently,
over thelast two years, generated 11-12 per cent earnings from the
[Link] Life Insurance is uniquely placed as a pioneer to
usher bancassurance into India. The company hopes to extensively
utilize theSBI Group as a platform for cross-selling insurance products
along withits numerous banking product packages such as housing
loans, personal loans and credit cards. SBIs access to over 100 million
accounts providesa vibrant base to build insurance selling across every
regionandeconomic strata in the country.

CHAPTER 8
 VARIOUS
TRENDS
CHALLENGES
TRENDS
Though bancassurance has traditionally targeted the
mass market, but bancassurers have begun to finely segment the
market, whichhas resulted in tailor-made products for each segment.
Some bancassurers are also beginning to focus exclusively
ondistribution.
In some markets, face-to-face contact is
preferred,which tends to favour bancassurance development.
Nevertheless, banks are starting to embrace direct marketing
andInternet banking as tools to distribute insurance products. New
andemerging channels are becoming increasingly competitive, due to
the tangible cost benefits embedded in product pricing or throughthe
appeal of convenience and innovation.
Bancassurance proper is still evolving in Asia and
this is still ininfancy in India and it is too early to assess the exact
[Link], a quick survey revealed that a large number of
bankscutting across public and private and including foreign banks
havemade use of the bancassurance channel in one form or the other
inIndia.
Banks by and large are resorting to either referral
models or Corporate agency model to begin with. Banks even offer
space in their own premises to accommodate theinsurance staff for
selling the insurance products or giving accessto their clients database
for the use of the insurance [Link] number of banks in India
have begun to act as corporateagents to one or the other insurance
company, it is a common sightthat banks canvassing and marketing the
insurance products acrossthe counter.
 CHALLENGES
Increasing 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 weightedagainst
the higher cost of servicing those policies.
1)Bank employees are traditionally low on motivation. Lack
of salesculture itself is bigger roadblock than the lack of sales skills in
theemployees. Banks are generally used to only product
packagedselling and hence selling insurance products do not seem to
fitnaturally 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
themotivation level are some issues that has cropped up
quiteoccasionally. So, before entering into a bancassurance alliance,
justlike any merger, cultural due diligence should be done and
humanresource issues should be adequately prioritized.
3)Private sector insurance firms are finding change
management inthe public sector, a major challenge. State-owned banks
get a newchairman, often from another bank, almost every two
years,resulting in the distribution strategy undergoing a complete
[Link] 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 aswell
as banks, there is a possibility of conflict if both the banks andthe agent
target the same customers.

CHAPTER 9
SWOT
ANALYSIS
 Bancassurance in - A SWOT Analysis:-
Strength :
Bancassurance can be a of fire way to reach a wider
customer base, provide it is made use of sensibly. In India there is an
extensive bank network established over the years. Insurance
companies will have to take advantage of the customer's longstanding
trust and relationship with banks. This is mutually beneficial situation as
Banks can expand the range of their products on offer to customers and
earn more, while the insurance company profits from the exposure at the
bank branches, and the security of receiving timely payments.

There are several untapped potential waiting to be mined

particularly for life insurance products in rural areas. Banks with their
network in rural areas, help to fulfill rural and social obligations as
stipulated by the Insurance Regulatory and Development Authority.

There are several reasons why bank should seriously

consider bancassurance., the most important of which is increase Return
on Assets(ROA).It offers fee-based non -interest income to the
banks without involving in any amount does not require any
additional capital.

Weakness :
The bancassurance calls for a paradigm shift in the
behavior of the banks, which have to develop marketing skills. Most of
the banks lack adequate marketing skills to perform these additional
responsibilities. At the same time, there is a need for banks to be
sensitive to customers of preferences.

Bancassurance could turn out be an example channel as it

requires huge investments in Wide Area Network (WAN) and VastArea
Network (VAN) to meet customer's needs on order to finalize a sale.
Another drawback is the inflexibility of the products that is it cannot be
tailor- made to the requirements of the customers. For bank assurance
venture to success, it is extremely essential to have in -built flexibility of
the products that is it cannot tailor-made to the requirements of the
customers. For a bank assurance venture to succeed, it is extremely
essential to have an in-built flexibility so as to make the product
attractive to the customer.

Opportunities :
Banks database is enormous and they have a wide
branch network. Millions of customer become accessible to insurance
companies through bank branches. This database has to be dissected
variously and various homogeneous groups are to be churned in order to
position the bank assurance products.
New private sector insurance companies are yet to
become popular. They are in existence for less than five years. In a short
period, to appoint agents all over the country and effectively follow them
would be an uphill task. They are in the process of building brand equity.
Tie up with Bank will help them to boost their image and provide great
opportunity for insurance as in as Bank, In this process is bank will also
benefits.
Customers have more faith in Banks and they view
those Banks as more responsible than individual agents. Moreover,
agents may not be available for further services, But customers can
approach the bank at any time and paying the premium is easier with
Bank because of standing instructions.
Threats:
Even insurance and Bank that seem ideally suited for a
bank assurance partnership can run into problems during
implementation. Success of a bancassurance venture requires change
in approach, thinking and work culture on the part of everybody involved.
The most common obstacles to success are manpower
management, lack of sales culture within the bank, non-involvement by
managers, insufficient product promotions, failure to integrate marketing
plans, marginal database expertise, inadequate incentives, a definite
threat of resistance to change, negative attitudes towards insurance and
unwieldy marketing strategy.
 CHAPTER 10
SOME TIE-UPS
SUCCESS
OF
BANCASSURANCE

Some important Tie- ups:-

1) Life Insurance Corporation of India with:-
Corporation 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.

2) Birla Sum Life Insurance Co Ltd With:

The Bank of Rajasthan, Andhra Bank, Bank of Muscat,
Development Credit Bank, Deutsche Bank and Catholic Syrian Bank.

3) Dabur CGU Life Insurance Company Private Ltd:-

Canara Bank Lashmi Vilas Bank, American Express
Bank, and ABN Amro Bank.

4) HDFC standerd Life Insurance Co. Ltd. With:-

Union Bank of India.

5) ICICI Prudential Life Insurance Co Ltd. With:-

 Lord Krishna Bank, ICICI Bank, Bank of India, Citibank,
Allahabad Bank, Federal Bank, South Indian Bank, and Punjab and
Maharashtra Co-operative Bank.

6) Met Life India Co. Ltd. With:-

Karnataka Bank, The Dhanalakshmi Bank and Jammu &
Kashmir Bank.

7) SBI Insurance Co. Ltd. With:-

State Bank of India and Associate Banks.

8) Bajaj Allianz General Insurance with:-

Krur Vysya Bank and Lord Krishna Bank

9) National Insurance Co Ltd With:-

City Union Bank,

10) Royal Sundaram General Insurance Company with:-

Standard Chartered Bank, ABN Amro Bank, Citibank Amex and
Repco Bank.

11)United India insurance Co. Ltd. With:-

South Indian Bank.

Success of Bancassurance
Banking and insurance have strong similarities that might have
contributed to their rapprochement, LIC and other insurance companies
have developed a range of products, that have direct conflict with
traditional bank offering or products.

New companies in Life Insurance sector would be looking for

cost effective channels for distribution which provide long reach.
Because of the existing extensive obviously emerged as the preferred
low cost distribution channel. This would also give the hold to, insurance
companies in the rural areas, thus providing an opportunity to tab the
virgin market.

Banks have large client base and cross selling surely provides
with an opportunity for optimum utilization of their existing customer
relationship thus effectively creating a win- win situation company and
the operational difficulties at ground level have to be managed and one
of the suggested ways is to re- structure the bank compensation
structure on the lines of insurance companies.

Last but not the least, the issue of consumer protection will
have to be suitably addressed by Regulators and consumers
themselves. Consumers though have consumer Protection Act to inhibit
banks and insurance co mpanies to show monopolistic properties or use
them as an arm twisting techniques. Though all said and done,
Regulators both IRDA and RBI should jointly formulate a policy and
process not to avoid the conflict of interest.

Measures to Improve Bancassurance in India:

1) Factors that are critical for success include strategies consistent with
Banks vision, knowledge of target customer's defined sales process for
introducing insurance services, simplest yet complete product offerings,
strong service delivery mechanism, quality administration, synchronized
planning, all business lines and subsidiaries, complete integration of
insurance with other business products and services, expensive and
high-quality training of sales personnel.

2) Another critical point to be tackled is customer service(CRM). Bank

should implement Customer Relationship Management(CRM) strategies
to handle the customers tactfully.

3) Bank should act as financial adviser to the customers in the portfolio

decisions and also assist them in early claim settlement.

4) Bank and insurance company should work jointly towards a model

global retail financial institution offering a wide array of products which
leads to creation of one-stop shop for mortgages, pensions, and
insurance products.
 CONCLUSION
The life Insurance Industry in India has been progressing
at a rapid growth since opening up of the sector. The size of country,
adverse set of people combined with problems of connectivity in rural
areas, makes insurance selling in India a very difficult task. Life
Insurance Companies require good distribution strength and tremendous
man power to reach out such a huge customer [Link] concept of
Bancassurance in India is still in its nascent stage, but the tremendous
growth and the potential reflects a very bright future for bancassurance
in India.

With the coming up of various products and services

tailored as per the customers needs there is every reason to be
optimistic that bancassurance in India will play a [Link] the
proper implementation of bancassurance is still facing so many hurdles
because of poor manpower management, lack of callcenters, no
personal contact with customers, inadequate incentives toagents and
unfullfilment of other essential requirements.

I have experienced a lot during the preparation of the

project. I had just a simple idea about Bancassurance. But after a
detailed research in this topic, I have found how important
bancassurance can be for bankers,insurers as well as the customers. I
am contented that all my objectives have been met to its fullest.I have
also experienced that though Bancassurance is not being utilized to its
fullest but it surely has a bright future ahead. India is at the threshold of
a significant change in the way insurance is perceived in the country.
Bancassurance will definitely play a defining role as alternative
distribution channel and will change the way insurance is soldin India.
The bridge has been reached and many are beginning to walk those
cautious steps across it. Bancassurance in India has just taken a
flyingstart. It has a long way to go .. after all The SKY IS THE
LIMIT!