Bancassurance

Introduction‘Bancassurance’ (Acc to IRDA)  refers to - banks acting as corporate

agents for - insurers to - distribute insurance products. term of - France in 1980 To define? - the sale of insurance

products through banks’ distribution channels.

What is Bancassurance? distribution of insurance products

through the bank's distribution channel

insurance products offered through banks

exploit synergies 

Models of bancassurance

I. Structural Classification

II. Product Based Classification

III. Bank Referrals

Models of bancassurance

I. Structural Structural ClassificationClassification

II. Product Based Classification

III. Bank Referrals

i. Referral Model

ii. Corporate Agency

iii. Insurance as fully integrated Joint Venture

Models of bancassurance

I. Structural Classification

II. Product Based Product Based

ClassificationClassification

III. Bank Referrals

i. Stand-alone Insurance Products

ii. Blend of Insurance with Bank Products

Models of bancassurance

I. Structural Classification

II. Product Based Classification

III. Bank ReferralsBank Referrals

Bancassurance in india In the past - insurance policies -

were for a small part of public (financially strong)

Today changed scenario - insurance policies reach all

SBI Life Insurance Company Limited

Joint venture between the State Bank of India and BNP Paribas Assurance registered with IRDA on 30.03.2001

State Bank of India --- 74%

BNP Paribas Assurance --- 26%.

Canara HSBC Oriental Bank of Commerce Life

Insurance Company Limited Share Holdings1. Canara Bank - 51%

2. HSBC Insurance (Asia Pacific) Holdings Ltd- 26%

3. Oriental Bank of Commerce - 23%

Paid up capital of INR 325 Crores.

Commenced its business on 6th of June, 2008

ING Vysya Life Insurance Company Limited

Started operations in India in September 2001

ING Life has a pan India presence in 234 cities, with over 367 sales teams

Need for bancassurance in india

Improve insurance policy channels (through which insurance policies are

sold/marketed so as to make them reach the hands of common man)

Widen the area of working of banking sector (to have a network that is spread widely in every

part of the nation)

Improve insurance services (by creating a competitive atmosphere among

private insurance companies in the market )

Advantages for the insurance company:

Distribution network helps extend customer base

Access to customers

Opportunity to vary distribution methods

Avoid excessive dependence on a single network

ADVANTAGES AND DISADVANTAGES OF

BANCASSURANCE

Advantages for the insurance company:

Trustworthy and reliable image of banks, transferred to insurance companies

Reduction in distribution costs

(inherent in traditional sales representatives)

Quick establishment in a new market

(using a local bank’s existing network)

ADVANTAGES AND DISADVANTAGES OF

BANCASSURANCE

Advantages for the Consumer:

•Consumer enjoys greater access

•Cheaper insurance products (due to the reduction in distribution costs than through traditional channels)

•The special relationship between the customer and the bank (customer’s needs and the solutions provided by the bank)

ADVANTAGES AND DISADVANTAGES OF

BANCASSURANCE

Disadvantage to the bank• Banks lack sales culture

• It can affect its ‘trust’ image

• Selling an insurance product is different from selling a banking product.

DEMERITS OF BANCASSURANCE

trends

Tailor-made products for each segment

Some bancassurers focus exclusively on distribution.

In some markets, face-to-face contact is preferred.

Banks are starting to embrace direct marketing and Internet banking.

trends Banks by and large are resorting to either

‘referral models’ or ‘Corporate agency model’.

Banks even offer space in their own premises to accommodate the insurance staff.

Number of banks in India have begun to act as ‘corporate agents’ to one or the other insurance company.

challenges Increasing sales of non-life products

(to the extent those risks are retained by the banks, require sophisticated products and risk management)

Bank employees are traditionally low on motivation

(Lack of sales culture itself is bigger roadblock than the lack of sales skills in the employees)

challenges Human Resource Management difficulty

(due to such alliances in financial industry)

Private sector insurance firms are finding ‘change management’ in the public sector

Fear of insurance partner

(banks may end up cross-selling banking products to their policyholders)

IRDA (Insurance Regulatory Development Authority)

3 ZONES (ZONE A, B , C)

Market Players !

J Hari NarayanIRDA CHAIRMAN

REGULATIONS UNDER IRDI AND RBI

ConclusionBancassurance in India has just taken a

flying start. It has a long way to go after all The SKY IS THE LIMIT!