BANCASSURANCE
Executive Summary
Bancassurance is a French term referring to the selling of insurance through a bank’s
established distribution channels. In other words we can say Bancassurance is the
provision of Insurance products by a bank. Bancassurance was originated in France in
198’s ! then it was widely spread across "urope. #his $oncept was introduced in India in
1999.
Bancassurance is gaining popularity day%by%day. #his report provides a bird’s eye view of the
current situation of Bancassurance. It also discusses about the importance of bancassurance in
today’s economy. #he Banking and Insurance industries have changed
rapidlyint he changi ng and chal l engi ng economi c envi r onment t hr oughout t hew
orld.In this competitive and liberali&ed environment everyone is trying to do better than others
and conse'uently survival of the fittest has come into effect.
I would like to present my pro(ect )B*+$*,,-.*+$"/ 0an emerging concept in India1.#he
pro(ect flashes some light on Bancassurance and how it is perceived by people in India. It deals
with the conceptual part of Bancassurance. #he main focus of this pro(ect is on benefits and
importance of Bancassurance.#he regulations governing Bancassurance areal so dealt with in
this pro(ect.,23# analysis is also done so as to identify the various opportunities and threats
for Bancassurance in India.
K.C. COLLEGE Page | 1
BANCASSURANCE
Chapter 1.Introduction
4B*+$*,,-.*+$"’ as term itself tells us what does it means. It’s a combination of the
term 4Bank’ and 4Insurance’. It means that insurance have started selling there product
through banks. It’s a new concept to Indian market but it is very widely used in western
and developed countries. It is profitable both to Banks and Insurance companies and has
a very bright future to be the most develop and efficient means of distribution of
Insurance product in very near future.
Insurance company can sell both life and non%life policies through banks. #he share of
premium collected by banks is increasing in a decent manner from the time it was
introduce to the Indian market. In India Bancassurance is guide by Insurance .egulatory
and 5evelopment *uthority *ct 0I.5*16 1999 and .eserve Bank of India. *ll banks and
insurance company have to meet particular re'uirement to get into Bancassurance
business.
It is predicted by e7perts that in future 98 of share of premium will come from
Bancassurance business only. $urrently there are more and more banking and Insurance
$ompany and venturing into Bancassurance business for better business prospect in
future.
#he banking business is also generating more profit by more premium collected by them
and they also receive commission like normal insurance agent which increase there
profits and better reputation for the banks as there service base also increase and are
able to provide more service to customers and even more customer are attracted toward
bank.
It is even profitable for Insurance $ompany as they receive more and more sales and
higher customer base for the company. *nd they have to directly deal with an
organi&ation which reduce there pressure to deal with each customer face to face.
In all Bancassurance has proved to be boom in whole Banking and Insurance arena.
Bancassurance is defined as 4,elling Insurance products through banks’. #he word is a
combination of two words 4Banc’ and 4assurance’ signifying that both banking and
insurance products and service are provided by one common corporate entity or by
banking company with collaboration with any particular Insurance company. In concrete
terms bancassurance6 which is also known as *llfinan& % describes a package of financial
services that can fulfill both banking and insurance needs at the same time.
K.C. COLLEGE Page | 2
BANCASSURANCE
#he usage of the word picked up as banking and insurance companies merged together
and banks sought to provide insurance6 in the market which has been liberali&ed recently.
But it is a controversial issue as many e7perts feels that this ides gives banking sector
too great a control over financial market in that country. #herefore it has also been
restricted in many countries too.
But6 still which countries have permitted Bancassurance in their market has seen a
tremendous boom in that sector. #he share of premium collected by them has increased
in constant and decent manner. #his success coincided with a favorable ta7ation for life
insurance products6 as well as with the consumers9 growing needs6 in terms of middle
and long term savings6 which is due to an inade'uacy of the pension schemes in India.
#he links between bank and insurance takes place through various ways 0distribution
agreements6 (oint ventures6 creation of a company new company1 which gives rise to a
complete upheaval concerning marketing strategies and the setting up of insurance
products9 distribution.
re and better insurance starts coming in market.
#his stream of market has (ust been opened very recently for the Indian market and there
is lot of development left to be done by the government and regulatory authority. But this
has proven to be a boom for the Insurance and Banking companies together and both the
different sector of the industry has shown better result and improvement in their own field
due coming of the whole new concept of B*+$*,,-.*+$".
K.C. COLLEGE Page | 3
Financial Services
Banking Insurance
Bancassurance
Bancassurance
BANCASSURANCE
Bancassurance in its simplest form is the distribution of insurance products through a
bank’s distribution channels. It is the provision of insurance and banking products and
service through a common distribution channel or through a common base.
Banks6 with their geographical spreading penetration in terms of customer’s reach of all
segments6 have emerged as viable source for the distribution of insurance products. It
takes various forms in various countries depending upon the demography and economic
and legislative climate of that country. #his concept gained importance in the growing
global insurance industry and its search for new channels of distribution.
;owever6 the evolution of bancassurance as a concept and its practical implementation in
various parts of the world6 have thrown up a number of opportunities and challenges.
#he concept of bancassurance was evolved in "urope. "urope leads the world in
Bancassurance market penetration of banks assurance in new life business in "urope
which ranges between 8 in France. ;owever6 hardly
?8 of all -nited ,tates banks were selling insurance against >8 to 98 in many
2estern "uropean countries. In ,pain6 Belgium6 @ermany and France more than A8 of
all new life premiums is generated by banks assurance. In *sia6 ,ingapore6 #aiwan and
;ong =ong have surged ahead in Bancassurance then that with India and $hina taking
tentative step forward towards it. In :iddle "ast6 only ,audi *rabia has made some
feeble attempts that even failed to really take off or make any change in the system.
#he motives behind bancassurance also vary. For Banks6 it is n means of product
diversification and source of additional fee income. Insurance companies see
bancassurance as a tool for increasing their market penetration and premium turnover.
#he customer sees bancassurance as a bonan&a in terms of reduced price6 high 'uality
products and delivery at the doorsteps.
2ith the liberali&ation of the insurance sector and competition tougher than ever before6
companies are increasingly trying to come out with better innovations to stay that one%step
ahead.
Brogress has definitely been made as can be seen by the number of advanced products
flooding the market today % products with attractive premiums6 uniti&ed products6 unit%linked
products and innovative riders. But a hitherto untapped field is the one involving the distribution
of these insurance products.
$urrently6 insurance agents are still the main vehicles through which insurance products are
sold. But in a huge country like India6 one can never be too sure about the levels of penetration
K.C. COLLEGE Page | 4
BANCASSURANCE
of a product. It therefore makes sense to look at well%balanced6 alternative channels of
distribution.
+ationali&ed insurers are already well established and have an e7tensive reach and presence.
+ew players may find it e7pensive and time consuming to bring up a distribution network to such
standards. Cet6 if they want to make the most of India9s large population base and reach out to a
worthwhile number of customers6 making use of other distribution avenues becomes a must.
*lternate channels will help to bring down the costs of distribution and thus benefit the
customers
What is Bancassurance?
Bancassurance is the distribution of insurance products through a bank9s distribution channels.
It is a service that can fulfill both banking and insurance needs at the same time.
Bancassurance as a concept first began in India when the insurance industry opened up to
private participation in 5ecember 1999. #here are basically four models of bancassuranceD
• 5istribution alliance between the insurance company and the bank.
• Eoint venture between the two companies.
• :ergers between a bank and insurer.
• Bank builds or buys own insurance products.
st of the bancassurance operations fall in the first model.
How does it help?
• "very insurance company has a wants to grow 'uickly to reduce painful start%up e7pense
overruns. Banks with their huge networks and large customer bases give insurers an
opportunity to do this efficiently.
• It gives the companies an opportunity to tap the rural sectors. ,elling insurance through
traditional methods in these sectors falls very e7pensive. * tie up with a bank with an
appropriate customer base can give an insurer a cheap access to these areas.
• Banassurance enables to have a huge pool of skilled professionals.
• #he margins of the banks in their core lending business are declining sharply.
3pportunities like banassurance augment their income.
• Banassurance enables to develop a sales culture within the bank. It helps to change the
traditional mindset of banking companies.
K.C. COLLEGE Page | 5
BANCASSURANCE
#hough a relatively new concept6 banassurance has been a phenomenal success in most of the
cases. $urrently banks are not (ust lending organi&ations but are emerging as more diverse
financial institutions. #he distribution of insurance products through banks has been beneficial to
both insurance and banking companies as well as the customers
Why should Banks enter Insurance?
#here are several reasons why banks should seriously consider Bancassurance6 the most
important of which is increased return on assets 0.3*1. 3ne of the best ways to increase .3*6
assuming a constant asset base6 is through fee income. Banks that build fee income can cover
more of their operating e7penses6 and one way to build fee income is through the sale of
insurance products. Banks that effectively cross%sell financial products can leverage their
distribution and processing capabilities for profitable operating e7pense ratios.
By leveraging their strengths and finding ways to overcome their weaknesses6 banks could
change the face of insurance distribution. ,ale of personal line insurance products through
banks meets an important set of consumer needs.st large retail banks engender a great deal
of trust in broad segments of consumers6 which they can leverage in selling them personal line
insurance products. In addition6 a bank’s branch network allows the face to face contact that is
so important in the sale of personal insurance.
*nother advantage banks have over traditional insurance distributors is the lower cost per sales
lead made possible by their si&able6 loyal customer base. Banks also en(oy significant brand
awareness within their geographic regions6 again providing for a lower per%lead cost when
advertising through print6 radio andFor television. Banks that make the most of these advantages
are able to penetrate their customer base and markets for above%average market share.
3ther bank strengths are their marketing and processing capabilities. Banks have e7tensive
e7perience in marketing to both e7isting customers 0for retention and cross selling1 and non%
customers 0for ac'uisition and awareness1. #hey also have access to multiple communications
channels6 such as statement inserts6 direct mail6 *#:s6 telemarketing6 etc. Banks9 proficiency in
using technology has resulted in improvements in transaction processing and customer service.
By successfully mining their customer databases6 leveraging their reputation and 9distribution
systems’ 0branch6 phone6 and mail1 to make appointments6 and utili&ing 9sales techni'ues’ and
products tailored to the middle market6 "uropean banks have more than doubled the conversion
rates of insurance leads into sales and have increased sales productivity to a ratio which is
more than enough to make Bancassurance a highly profitable proposition.
K.C. COLLEGE Page | 6
BANCASSURANCE
Chapter .Bankin! on Bancassurance
#hough much ado was made about bancassurance6 an alternate channel to hawk risk products
through banks6 the channel is yet to pick up pace as of today.st of the insurance companies
have already tied up with banks to e7plore the potential of the channel that has been a success
story in "urope and legislations are also in place. For insurance companies and banks the
convergence brings about benefits for both but then what’s stopping it from taking off in a big
wayG
Bancassurance primarily banks on the relationship the customer has developed over a period of
time with the bank. *nd pushing risk products through banks is a cost%effective affair for an
insurance company compared to the agent route6 while6 for banks6 considering the falling
interest rates6 fee based income coming in at a minimum cost is more than welcome.
,BI Hife Insurance $ompany a predominant player in bancassurance is positive about the
channel bringing about a transformation in the way insurance has been sold so far..BI guideline
for banks entering into insurance sector provides three options for banks. #hey areD
"mphasi&ing heavily on bancassurance and plans to e7plore the potential of ,tate Bank of
India’s 9 plus branches spread across the country and also its I plus associate banks %
one of the reasons why ,BI Hife Insurance is not laying much emphasis on increasing its agent
force from the present
Executive Summary
Bancassurance is a French term referring to the selling of insurance through a bank’s
established distribution channels. In other words we can say Bancassurance is the
provision of Insurance products by a bank. Bancassurance was originated in France in
198’s ! then it was widely spread across "urope. #his $oncept was introduced in India in
1999.
Bancassurance is gaining popularity day%by%day. #his report provides a bird’s eye view of the
current situation of Bancassurance. It also discusses about the importance of bancassurance in
today’s economy. #he Banking and Insurance industries have changed
rapidlyint he changi ng and chal l engi ng economi c envi r onment t hr oughout t hew
orld.In this competitive and liberali&ed environment everyone is trying to do better than others
and conse'uently survival of the fittest has come into effect.
I would like to present my pro(ect )B*+$*,,-.*+$"/ 0an emerging concept in India1.#he
pro(ect flashes some light on Bancassurance and how it is perceived by people in India. It deals
with the conceptual part of Bancassurance. #he main focus of this pro(ect is on benefits and
importance of Bancassurance.#he regulations governing Bancassurance areal so dealt with in
this pro(ect.,23# analysis is also done so as to identify the various opportunities and threats
for Bancassurance in India.
K.C. COLLEGE Page | 1
BANCASSURANCE
Chapter 1.Introduction
4B*+$*,,-.*+$"’ as term itself tells us what does it means. It’s a combination of the
term 4Bank’ and 4Insurance’. It means that insurance have started selling there product
through banks. It’s a new concept to Indian market but it is very widely used in western
and developed countries. It is profitable both to Banks and Insurance companies and has
a very bright future to be the most develop and efficient means of distribution of
Insurance product in very near future.
Insurance company can sell both life and non%life policies through banks. #he share of
premium collected by banks is increasing in a decent manner from the time it was
introduce to the Indian market. In India Bancassurance is guide by Insurance .egulatory
and 5evelopment *uthority *ct 0I.5*16 1999 and .eserve Bank of India. *ll banks and
insurance company have to meet particular re'uirement to get into Bancassurance
business.
It is predicted by e7perts that in future 98 of share of premium will come from
Bancassurance business only. $urrently there are more and more banking and Insurance
$ompany and venturing into Bancassurance business for better business prospect in
future.
#he banking business is also generating more profit by more premium collected by them
and they also receive commission like normal insurance agent which increase there
profits and better reputation for the banks as there service base also increase and are
able to provide more service to customers and even more customer are attracted toward
bank.
It is even profitable for Insurance $ompany as they receive more and more sales and
higher customer base for the company. *nd they have to directly deal with an
organi&ation which reduce there pressure to deal with each customer face to face.
In all Bancassurance has proved to be boom in whole Banking and Insurance arena.
Bancassurance is defined as 4,elling Insurance products through banks’. #he word is a
combination of two words 4Banc’ and 4assurance’ signifying that both banking and
insurance products and service are provided by one common corporate entity or by
banking company with collaboration with any particular Insurance company. In concrete
terms bancassurance6 which is also known as *llfinan& % describes a package of financial
services that can fulfill both banking and insurance needs at the same time.
K.C. COLLEGE Page | 2
BANCASSURANCE
#he usage of the word picked up as banking and insurance companies merged together
and banks sought to provide insurance6 in the market which has been liberali&ed recently.
But it is a controversial issue as many e7perts feels that this ides gives banking sector
too great a control over financial market in that country. #herefore it has also been
restricted in many countries too.
But6 still which countries have permitted Bancassurance in their market has seen a
tremendous boom in that sector. #he share of premium collected by them has increased
in constant and decent manner. #his success coincided with a favorable ta7ation for life
insurance products6 as well as with the consumers9 growing needs6 in terms of middle
and long term savings6 which is due to an inade'uacy of the pension schemes in India.
#he links between bank and insurance takes place through various ways 0distribution
agreements6 (oint ventures6 creation of a company new company1 which gives rise to a
complete upheaval concerning marketing strategies and the setting up of insurance
products9 distribution.
re and better insurance starts coming in market.#his stream of market has (ust been opened very recently for the Indian market and there
is lot of development left to be done by the government and regulatory authority. But this
has proven to be a boom for the Insurance and Banking companies together and both the
different sector of the industry has shown better result and improvement in their own field
due coming of the whole new concept of B*+$*,,-.*+$".
K.C. COLLEGE Page | 3
Financial Services
Banking Insurance
Bancassurance
Bancassurance
BANCASSURANCE
Bancassurance in its simplest form is the distribution of insurance products through a
bank’s distribution channels. It is the provision of insurance and banking products and
service through a common distribution channel or through a common base.
Banks6 with their geographical spreading penetration in terms of customer’s reach of all
segments6 have emerged as viable source for the distribution of insurance products. It
takes various forms in various countries depending upon the demography and economic
and legislative climate of that country. #his concept gained importance in the growing
global insurance industry and its search for new channels of distribution.
;owever6 the evolution of bancassurance as a concept and its practical implementation in
various parts of the world6 have thrown up a number of opportunities and challenges.
#he concept of bancassurance was evolved in "urope. "urope leads the world in
Bancassurance market penetration of banks assurance in new life business in "urope
which ranges between 8 in France. ;owever6 hardly
?8 of all -nited ,tates banks were selling insurance against >8 to 98 in many
2estern "uropean countries. In ,pain6 Belgium6 @ermany and France more than A8 of
all new life premiums is generated by banks assurance. In *sia6 ,ingapore6 #aiwan and
;ong =ong have surged ahead in Bancassurance then that with India and $hina taking
tentative step forward towards it. In :iddle "ast6 only ,audi *rabia has made some
feeble attempts that even failed to really take off or make any change in the system.
#he motives behind bancassurance also vary. For Banks6 it is n means of product
diversification and source of additional fee income. Insurance companies see
bancassurance as a tool for increasing their market penetration and premium turnover.
#he customer sees bancassurance as a bonan&a in terms of reduced price6 high 'uality
products and delivery at the doorsteps.
2ith the liberali&ation of the insurance sector and competition tougher than ever before6
companies are increasingly trying to come out with better innovations to stay that one%step
ahead.
Brogress has definitely been made as can be seen by the number of advanced products
flooding the market today % products with attractive premiums6 uniti&ed products6 unit%linked
products and innovative riders. But a hitherto untapped field is the one involving the distribution
of these insurance products.
$urrently6 insurance agents are still the main vehicles through which insurance products are
sold. But in a huge country like India6 one can never be too sure about the levels of penetration
K.C. COLLEGE Page | 4
BANCASSURANCE
of a product. It therefore makes sense to look at well%balanced6 alternative channels of
distribution.
+ationali&ed insurers are already well established and have an e7tensive reach and presence.
+ew players may find it e7pensive and time consuming to bring up a distribution network to such
standards. Cet6 if they want to make the most of India9s large population base and reach out to a
worthwhile number of customers6 making use of other distribution avenues becomes a must.
*lternate channels will help to bring down the costs of distribution and thus benefit the
customers
What is Bancassurance?
Bancassurance is the distribution of insurance products through a bank9s distribution channels.
It is a service that can fulfill both banking and insurance needs at the same time.
Bancassurance as a concept first began in India when the insurance industry opened up to
private participation in 5ecember 1999. #here are basically four models of bancassuranceD
• 5istribution alliance between the insurance company and the bank.
• Eoint venture between the two companies.
• :ergers between a bank and insurer.
• Bank builds or buys own insurance products.
st of the bancassurance operations fall in the first model.How does it help?
• "very insurance company has a wants to grow 'uickly to reduce painful start%up e7pense
overruns. Banks with their huge networks and large customer bases give insurers an
opportunity to do this efficiently.
• It gives the companies an opportunity to tap the rural sectors. ,elling insurance through
traditional methods in these sectors falls very e7pensive. * tie up with a bank with an
appropriate customer base can give an insurer a cheap access to these areas.
• Banassurance enables to have a huge pool of skilled professionals.
• #he margins of the banks in their core lending business are declining sharply.
3pportunities like banassurance augment their income.
• Banassurance enables to develop a sales culture within the bank. It helps to change the
traditional mindset of banking companies.
K.C. COLLEGE Page | 5
BANCASSURANCE
#hough a relatively new concept6 banassurance has been a phenomenal success in most of the
cases. $urrently banks are not (ust lending organi&ations but are emerging as more diverse
financial institutions. #he distribution of insurance products through banks has been beneficial to
both insurance and banking companies as well as the customers
Why should Banks enter Insurance?
#here are several reasons why banks should seriously consider Bancassurance6 the most
important of which is increased return on assets 0.3*1. 3ne of the best ways to increase .3*6
assuming a constant asset base6 is through fee income. Banks that build fee income can cover
more of their operating e7penses6 and one way to build fee income is through the sale of
insurance products. Banks that effectively cross%sell financial products can leverage their
distribution and processing capabilities for profitable operating e7pense ratios.
By leveraging their strengths and finding ways to overcome their weaknesses6 banks could
change the face of insurance distribution. ,ale of personal line insurance products through
banks meets an important set of consumer needs.
st large retail banks engender a great dealof trust in broad segments of consumers6 which they can leverage in selling them personal line
insurance products. In addition6 a bank’s branch network allows the face to face contact that is
so important in the sale of personal insurance.
*nother advantage banks have over traditional insurance distributors is the lower cost per sales
lead made possible by their si&able6 loyal customer base. Banks also en(oy significant brand
awareness within their geographic regions6 again providing for a lower per%lead cost when
advertising through print6 radio andFor television. Banks that make the most of these advantages
are able to penetrate their customer base and markets for above%average market share.
3ther bank strengths are their marketing and processing capabilities. Banks have e7tensive
e7perience in marketing to both e7isting customers 0for retention and cross selling1 and non%
customers 0for ac'uisition and awareness1. #hey also have access to multiple communications
channels6 such as statement inserts6 direct mail6 *#:s6 telemarketing6 etc. Banks9 proficiency in
using technology has resulted in improvements in transaction processing and customer service.
By successfully mining their customer databases6 leveraging their reputation and 9distribution
systems’ 0branch6 phone6 and mail1 to make appointments6 and utili&ing 9sales techni'ues’ and
products tailored to the middle market6 "uropean banks have more than doubled the conversion
rates of insurance leads into sales and have increased sales productivity to a ratio which is
more than enough to make Bancassurance a highly profitable proposition.
K.C. COLLEGE Page | 6
BANCASSURANCE
Chapter .Bankin! on Bancassurance
#hough much ado was made about bancassurance6 an alternate channel to hawk risk products
through banks6 the channel is yet to pick up pace as of today.
st of the insurance companieshave already tied up with banks to e7plore the potential of the channel that has been a success
story in "urope and legislations are also in place. For insurance companies and banks the
convergence brings about benefits for both but then what’s stopping it from taking off in a big
wayG
Bancassurance primarily banks on the relationship the customer has developed over a period of
time with the bank. *nd pushing risk products through banks is a cost%effective affair for an
insurance company compared to the agent route6 while6 for banks6 considering the falling
interest rates6 fee based income coming in at a minimum cost is more than welcome.
,BI Hife Insurance $ompany a predominant player in bancassurance is positive about the
channel bringing about a transformation in the way insurance has been sold so far..BI guideline
for banks entering into insurance sector provides three options for banks. #hey areD
"mphasi&ing heavily on bancassurance and plans to e7plore the potential of ,tate Bank of
India’s 9 plus branches spread across the country and also its I plus associate banks %
one of the reasons why ,BI Hife Insurance is not laying much emphasis on increasing its agent
force from the present