Bancassurance

WHAT IS BANCASSURANCE?

 Distribution of insurance products through a bank‟s distribution
channels.
 According to IRDA, „bancassurance‟ refers to banks acting as
corporate agents for insurers to distribute insurance products
 Life Insurance Marketing and Research Association’s
insurance dictionary defines bancassurance as “the provision
of life insurance services by banking and building societies”.

BANCASSURANCE IN INDIA
 In the year 2002 the banks of India were permitted
to do insurance business for the first time.
 It is regulated by both RBI and IRDA as it is
combination of bank and insurance.
 It is a Win-Win Strategy

 Example: SBI Life Insurance Company Ltd has tie
up with SBI.

RBI GUIDELINE FOR BANKS ENTERING INTO
INSURANCE SECTOR PROVIDES THREE
OPTIONS FOR BANKS. THESE ARE:
 Joint venture will be allowed for financially strong
banks wishing to undertake insurance business
with risk participation;
 For banks which are not eligible for this joint-
venture option, an investment option of up to 10 %
of the net worth of the bank or Rs. 50 crore,
whichever is lower, is available.
 Any commercial bank will be allowed to undertake
insure business as agent of insurance companies.
This will be on a fee basis with no-risk participation.

THE INSURANCE REGULATORY AND DEVELOPMENT
AUTHORITY (IRDA) GUIDELINES FOR THE
BANCASSURANCE ARE:

 Each bank that sells insurance must have a chief
insurance executive to handle all the insurance
activities;
 All the people involved in selling should under-go
mandatory training at an institute accredited by
IRDA and pass the examination conducted by the
authority;
 Commercial banks may become corporate agents
for one insurance company
 Banks cannot become insurance brokers.

BANCASSURANCE SALES MODELS
 Separate Sales Force
Minimum integration between the staff of the
partners and merely utilize the customer database for
insurance product prospecting.
 Hand in Glove
 Sales force of the insurer utilizing the resources of
the bank (customer base, brand infrastructure , bank
staff expertise).
 Bank staff sells simply package product, but act as
introducers & in the case of more complex products
the insurer‟s financial planner undertake the
constructive selling process and final lead closure.
 High interaction between the bank and insurer‟s staff.

 Fully Integrated
 Insurance sales process is wholly owned
by the bank staff while the insurer acts
only as a product and service provider.
 Exploitation of bank‟s strength and does
not utilize the skills of the insurer.

ADVANTAGE FOR THE BANKS
 Revenue diversification
 Satisfaction of more financial needs under the
same roof
 Customer retention-Increase in customer loyalty

 More profitable resource utilization

 Enriched work environment

 Establish sales oriented culture

ADVANTAGE FOR THE INSURANCE
COMPANIES
 Revenue and channel diversification
 Quality customer access

 Quicker geographical reach creation of brand equity

 Increase in volume and profit

 Improved brand equity

ADVANTAGE FOR THE CONSUMER
 Enhanced convenience
 One stop shopping for all financial services

 Innovative and better product ranges

 More credible solution

SWOT ANALYSIS

STRENGTH:
 Vast untapped market

 Huge pool of skilled professionals

WEAKNESS:
 Lack of networking among bank branches

 Saving Ability of Middle Class

OPPORTUNITY:
 Data mining :Banks have a huge customer
database which has to be properly leveraged.
Target segments should be identified and tapped.
 Wide distribution networks of banks

THREATS:
 Human Resource Challenges

 Non-response from the target groups can also pose
a challenge.

Bancassurance

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