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BANCASSURANCE IN INDIA
Submitted by: Shobhit Saxena Roll No. 14108

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Table of Contents
Introduction..3 What Is Bancassurance?............................................................................................................... ..............4 Meaning4 Origin5 Bancassurance Framework5 Scope For Bancassurance In India ...6 Why Should Banks Enter Insurance?.......................................................................................................7 Advantages To Insurers......8 Advantages To Consumers.9 Models Of Bancassurance...9 Existing Tie-Ups Between Insurance Companies And Banks ..12 Existing Relationship Between Insurance Companies And Banks ..12 RBI Norms For Banks..13 IRDA Norms For Insurance Companies.15 Reasons For Growing Phenomena Of Bancassurance...16 Growth In Some Of The Key Elements...17 Critical Success Factor..17 Distribution Channels18 Trends 20 Challenges...21 Swot Analysis.22 Recommendations.26 Example: Sbi Life Insurance....27 Conclusion..28 Bibliography.......29

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INTRODUCTION The Banking and Insurance industries have changed rapidly in t h e c h a n g i n g a n d c h a l l e n g i n g e c o n o m i c e n v i r o n m e n t t h r o u g h o u t t h e world. In this competitive and liberalized environment everyone is trying to do better than others and consequently survival of the fittest has come into effect The life insurance industry in India has been progressing at a rapid pace since opening up of the sector in 2000. The size of the country, a diverse set of people combined with problems of connectivity in rural areas, makes insurance selling in India a very difficult proposition. Life insurance companies require immense distribution strength and tremendous manpower to reach out to such a huge customer base. This distribution will undergo a sea change as various insurance companies are proposing to bring insurance products into the lives of the common man by making them available at the most basic financial point, the local bank branch, through Bancassurance. Simply put, Bancassurance is the process through which insurance products are sold to customers at their local banks. Bancassurance - a term coined by combining the two words bank and insurance (in French) - connotes distribution of insurance products through banking channels. This concept gained currency in the growing global insurance industry and its search for new channels of distribution. Banks, with their geographical spread and penetration in terms of customer reach of all segments, have emerged as viable sources for the distribution of insurance products. With banking network of 65,000 branches serving more than 300 million retail banking customers, insurance can be available at affordable prices to people even in remote corners of the country. The relationship is symbiotic; but there are challenges. The most common challenges to success are poor manpower management, lack of a sales culture within the bank, no involvement by the branch manager, insufficient product promotions, failure to integrate marketing plans, marginal database expertise, poor sales channel linkages, inadequate incentives, resistance to change, negative attitudes toward insurance and unwieldy marketing strategy. Even insurers and banks that seem ideally suited for a Bancassurance partnership can run into problems during implementation. One more important obstacle in development of Bancassurance in India has been a set of regulatory barriers. Some of these have recently been cleared with the passage of the Insurance (Amendment) Act, 2002. Looking at the west where sales through the banking network have been a roaring success, the Indian banking sector has far to go. But one thing stands obvious. If insurance in India is to succeed, it can only be through the Bancassurance channel.

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WHAT IS BANCASSURANCE? With the opening up of the insurance sector and with so many players entering the Indian insurance industry, it is required by the insurance companies to come up with innovative products, create more consumer awareness about their products and offer them at a competitive price. Since the banking services, insurance and fund management are all interrelated activities and have inherent synergies, selling of insurance by banks would be mutually beneficial for banks and insurance companies. With these developments and increased pressures in combating competition, companies are forced to come up with innovative techniques to market their products and services. At this juncture, banking sector with it's far and wide reach, was thought of as a potential distribution channel, useful for the insurance companies. This union of the two sectors is what is known as Bancassurance.

MEANING Bancassurance is the distribution of insurance products through the bank's distribution channel. It is a phenomenon wherein insurance products are offered through the distribution channels of the banking services along with a complete range of banking and investment products and services. To put it simply, Bancassurance, tries to exploit synergies between both the insurance companies and banks. Bancassurance can be important source of revenue. With the increased competition and squeezing of interest rates spread, profits are likely to be under pressure. Fee based income can be increased through hawking of risk products like insurance. Bancassurance if taken in right spirit and implemented properly can be win-win situation for the all the participants' viz., banks, insurers and the customer. According to IRDA, Bancassurance refers to banks acting as corporate agents for insurers to distribute insurance products. Literature on Bancassurance does not differentiate if the Bancassurance refers to selling of life insurance products or non-life insurance products. Accordingly, Bancassurance is defined to mean banks dealing in insurance products of both life and non-life type in any forms. It is also important to clarify that the term Bancassurance does not just refer specifically to distribution alone. Other features, such as legal, fiscal, cultural and/or behavioural aspects also form an integral part of the concept of Bancassurance (SCOR 2003).

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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.

BANCASSURANCE FRAMEWORK

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SCOPE FOR BANCASSURANCE IN INDIA It has become clear that as economy grows it not only demands stronger and vibrant financial sector but also necessitates provision of more sophisticated and variety of financial and banking products and services. As India is being considered one of the fast developing economies among the emerging market economies, financial sector has also become more vibrant with the financial reforms. In fact, in recent years, it is surmised that even the global economic growth hinges on growth prospects of the emerging economies like China and India to a greater extent. Experience also showed that economic growth had strongly supported the expansion of middle income class in most of the Asian countries, and now it is the turn of India. Experience reveals that at the initial growing stage of the economy the primary financial needs are met by the banking system and thereafter as the economy moves on to higher levels, the need for the other non-banking financial products including insurance, derivatives, etc., are strongly felt. Moreover, as India has already more than 200 million middle class population coupled with vast banking network with largest depositors base, there is greater scope for use of Bancassurance. For instance, as at end March 2009, there were more than 543 lakh bank accounts with scheduled commercial banks. In simple words, it is aptly put that Bancassurance has promised to combine insurance companies competitive edge in the production of insurance products with banks edge in their distribution, through their vast retail networks. The prospects of Bancassurance in India are really bright because of following reasons: Increasing PPP (purchasing power parity). Huge inflow of FDI. Expansion of middle income class Indians. Though slowed down, Indian economy is still growing faster than most Huge banking infrastructure across urban, semi urban & rural India. BASEL NORM-II (2009).

India has 88 scheduled commercial banks (SCBs) - 28 public sector banks (that is with the government of India holding a stake), 29 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges ) and 31 foreign banks. Altogether they have a combined network of over 53,000 branches and reach in urban, semi urban & rural areas of nation. There are 70324 bank offices in India and around 16000 people are served by each bank office. Its a huge banking infrastructure and among the best banking network in the world. Bancassurance if taken in right spirit and implemented properly can be a win-win situation for the all the participants, viz., banks, insurers and the customers.

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WHY SHOULD BANKS ENTER INSURANCE? There are several reasons why banks should seriously consider Bancassurance: The most important of which is increased return on assets (ROA). One of the best ways to increase ROA, assuming a constant asset base, is through fee income. Banks that build fee income can cover more of their operating expenses, 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 expense ratios. By leveraging their strengths and finding ways to overcome their weaknesses, banks could change the face of insurance distribution. Sale of personal line insurance products through banks meets an important set of consumer needs. Most large retail banks engender a great deal of trust in broad segments of consumers, which they can leverage in selling them personal line insurance products. In addition, a banks branch network allows the face to face contact that is so important in the sale of personal insurance. Another advantage banks have over traditional insurance distributors is the lower cost per sales lead made possible by their sizable, loyal customer base. Banks also enjoy significant brand awareness within their geographic regions, again providing for a lower per-lead cost when advertising through print, radio and/or television. Banks that make the most of these advantages are able to penetrate their customer base and markets for above-average market share. Other bank strengths are their marketing and processing capabilities. Banks have extensive experience in marketing to both existing customers (for retention and cross selling) and non-customers (for acquisition and awareness). They also have access to multiple communications channels, such as statement inserts, direct mail, ATMs, telemarketing, etc. Banks' proficiency in using technology has resulted in improvements in transaction processing and customer service By successfully mining their customer databases, leveraging their reputation and 'distribution systems (branch, phone, and mail) to make appointments, and utilizing 'sales techniques and products tailored to the middle market, European 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.

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ADVANTAGES TO INSURERS The Insurance Company can increase their business through the banking distribution channels because the banks have so many customers. By cutting cost Insurers can serve better to customers in terms lower premium rate and better risk coverage through product diversification. Insurers can exploit the banks' wide network of branches for distribution of products. The penetration of banks' branches into the rural areas can be utilized to sell products in those areas. Customer database like customers' financial standing, spending habits, investment and purchase capability can be used to customize products and sell accordingly. Since banks have already established relationship with customers, conversion ratio of leads to sales is likely to be high. Further service aspect can also be tackled easily. The insurance companies can also get access to ATMs and other technology being used by the banks. The selling can be structured properly by selling insurance products through banks. The product can be customized as per the needs of the customers

A Win-Win Situation

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ADVANTAGES TO CONSUMERS Product innovation and distribution activities are directed towards the satisfaction of needs of the customer. Bancassurance model assists customers in terms of reduction price, diversified product quality in time and at their doorstep service by banks. Comprehensive financial advisory services under one roof. i.e., insurance services along with other financial services such as banking, mutual funds, personal loans etc. Easy accesses for claims, as banks are a regular visiting place for customers. Innovative and better product ranges and products designed as per the needs of customers. Any new insurance product routed through the Bancassurance Channel would be well received by customers. Customers could also get a share in the cost savings in the form of reduced premium rate because of economies of scope, besides getting better financial counseling at single point.

MODELS OF BANCASSURANCE 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 of commission. The actual transaction with the prospective client in referral model is done by the staff of the insurance company either at the premises of the ban0k 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 of 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 can resort to this model and then move on to the other models.

b) Corporate Agency The other form of non-sick participatory distribution channel is that of Corporate Agency, wherein the bank staff as an institution acts as corporate agent for the insurance product 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, however, is prone to reputational risk of the marketing bank. There are also practical difficulties in the form of

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professional knowledge about the insurance products. 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. This model of bancassurance worked well in the US, because consumers generally prefer to purchase policies through broker banks that offer a wide range of products from competing insurers.

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. This includes banks having wholly owned insurance subsidiaries with or without foreign participation. The great advantage of this strategy being that the bank could make use of its full potential to reap the benefit of synergy and therefore the economies of scope. This may be suitable to relatively larger banks with sound financials and has better infrastructure. As per the extant regulation of insurance sector the foreign insurance company could enter the Indian insurance market only in the form of joint venture, therefore, this type of bancassurance seems to have emerged out of necessity in India to an extent. There is great scope for further growth both in life and non-life insurance segments as GOI is reported have been actively considering to increase the FDIs participation up to 49 per cent.

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.

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(b) Blend of Insurance with Bank Products This method aims at blending of insurance products as a value addition while promoting the banks 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. Bank 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 every where as the banks get commission, the insurance companies get databases of the customers and the customers get the benefits.

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Existing Tie-Ups Between Insurance Companies And Banks

Existing Relationship Between Insurance Companies And Banks

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RBI NORMS FOR BANKS 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

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% of the paid up capital of the insurance company. 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% of the equity with the approval of Insurance Regulatory and Development Authority/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.

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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 consecutive years.

6. All banks entering into insurance business will be required to obtain 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. There should be arms length relationship between the bank and the insurance outfit.

7. Holding of equity by a promoter bank in an insurance company or participation in any form in insurance business will be subject to compliance with any rules and regulations laid down by the IRDA/Central Government. This will include compliance with Section 6AA of the Insurance Act as amended by the IRDA Act, 1999, for divestment of equity in excess of 26 per cent of the paid up capital within a prescribed period of time.

8. Latest audited balance sheet will be considered for reckoning the eligibility criteria.

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IRDA NORMS FOR INSURANCE COMPANIES The Insurance regulatory development & Authority has given certain guidelines for the Bancassurance they are as follows Chief Insurance Executive: Each bank that sells insurance must have a chief Insurance Executive to handle all the insurance matters & activities. Mandatory Training: All the people involved in selling the insurance should under-go mandatory training at an institute determined (authorized) by IRDA & pass the examination conducted by the authority. Corporate agents: Commercial banks, including co-operative banks and RRBs may become corporate agents for one insurance company. Banks cannot become insurance brokers. Issues for regulation: Certain regulatory barriers have slowed the development of Bancassurance in India down. Which have only recently been cleared with the passage of the insurance (amendment) Act 2002. Prior it was clearly an impractical necessity and had held up the implementation of Bancassurance in the country. As the current legislation places the following: Training and examination requirements: upon the corporate insurance executive within the corporate agency, this barrier has effectively been removed. Another regulatory change is published in recent publication of IRDA regulation relating to the Licensing of Corporate agents Specified person to satisfy the training & examination: According to new regulation of IRDA only the specific persons have to satisfy the training & examination requirement as insurance agent.

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REASONS FOR GROWING PHENOMENA OF BANCASSURANCE Life insurance premium represents 55% of the world insurance premium and life insurance is basically a saving market. So it is one of the methods to increase deposits of banks. In Non life insurance business banks are looking to provide additional flow of revenues from the same customers through the same channel of distribution and with the same people. Insurers have been turning in ever greater numbers to alternative modes of distribution because of the high costs they have paid for agent services. These costs became too much of a burden for many insurers compared to the returns they generated. Insurers operating through bancassurance hone and control relationships with customers. Insurers found that direct relationships with customers gave them greater control of their business at a lower cost. Insurers who operate through the agency relationships hardly have any control on their relationship with their clients. The ratio of expenses to premiums, as an important efficiency factor, is noticed very well that expenses ratio in insurance activities through bancassurance is extensively low as the bank and the insurance company is benefiting from the same distribution channels and people. The prospects for increased consolidation between banking and insurance is more likely dominated and derived by the marketing innovations that are likely to follow from financial service modernization. Such innovations would include cross selling of banking, insurance and brokerage products and services; the increased use of the Internet by consumers and a blending of insurance and banking corporate cultures.

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CRITICAL SUCCESS FACTOR

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DISTRIBUTION CHANNELS Traditionally, insurance products were promoted and sold principally through agency systems only. The reliance of insurance industry was totally on the agents. Moreover with the monopoly of public sector insurance companies there was very slow growth in the insurance sector because of lack of competition. The need for innovative distribution channels was not felt because all the companies relied only upon the agents and aggressive marketing of the products was also not done. But with new developments in consumers behaviours, evolution of technology and deregulation, new distribution channels have been developed successfully and rapidly in recent years. Recently Bancassurers have been making use of various distribution channels, they are: a. Career Agents Career Agents are full-time commissioned sales personnel holding an agency contract. They are generally considered to be independent contractors. Consequently an insurance company can exercise control only over the activities of the agent which are specified in the contract. Many bancassurers, however avoid this channel, believing that agents might oversell out of their interest in quantity and not quality. Such problems with career agents usually arise, not due to the nature of this channel, but rather due to the use of improperly designed remuneration and incentive packages. b. Special Advisers Special Advisers are highly trained employees usually belonging to the insurance partner, who distribute insurance products to the bank's corporate clients. The Clients mostly include affluent population who require personalised and high quality service. Usually Special advisors are paid on a salary basis and they receive incentive compensation based on their sales. c. Salaried Agents Salaried Agents are an advantage for the bancassurers because they are under the control and supervision of bancassurers. These agents share the mission and objectives of the bancassurers. These are similar to career agents, the only difference is in terms of their remuneration is that they are paid on a salary basis and career agents receive incentive compensation based on their sales. d. Bank Employees / Platform Banking Platform Bankers are bank employees who spot the leads in the 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 the effectiveness of bank employees in generating insurance business is that they have a limited target market, i.e. those customers who actually visit the branch during the opening hours.

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e. Corporate Agencies and Brokerage Firms There are a number of banks who cooperate with independent agencies or brokerage firms while some other banks have found corporate agencies. The advantage of such arrangements is the availability of specialists needed for complex insurance matters and through these arrangements the customers get good quality of services. f. Direct Response In this channel no salesperson visits the customer to induce a sale and no face-to-face contact between consumer and seller occurs. The consumer purchases products directly from the bancassurer by responding to the company's advertisement, mailing or telephone offers. This channel can be used for simple packaged products which can be easily understood by the consumer without explanation. g. Internet Internet banking is already securely established as an effective and profitable basis for conducting banking operations. Bancassurers can feel confident that Internet banking will also prove an efficient vehicle for cross selling of insurance savings and protection products. Functions requiring user input (check ordering, what-if calculations, credit and account applications) should be immediately added with links to the insurer. Such an arrangement can also provide a vehicle for insurance sales, service and leads. h. Brokerage Banks can open or acquire an e-Brokerage arm and sell insurance products from multiple insurers. The changed legislative climate across the world should help migration of bancassurance in this direction. The advantage of this medium is scale of operation, strong brands, easy distribution and excellent synergy with the internet capabilities. i. Outside Lead Generating Techniques One last method for developing bancassurance eyes involves "outside" lead generating techniques, such as seminars, direct mail 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 each financial institution.

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TRENDS Though bancassurance has traditionally targeted the mass market, but bancassurers have begun to finely segment the market, which has resulted in tailor-made products for each segment. Some bancassurers are also beginning to focus exclusively on distribution. In some markets, face-to-face contact is preferred, which tends to favour bancassurance development. Nevertheless, banks are starting to embrace direct marketing and Internet banking as tools to distribute insurance products. New and emerging channels are becoming increasingly competitive, due to the tangible cost benefits embedded in product pricing or through the appeal of convenience and innovation. Bancassurance proper is still evolving in Asia and this is still in infancy in India and it is too early to assess the exact position. However, a quick survey revealed that a large number of banks cutting across public and private and including foreign banks have made use of the bancassurance channel in one form or the other in India. Banks by and large are resorting to either referral models or model to begin with. Corporate agency

Banks even offer space in their own premises to accommodate the insurance staff for selling the insurance products or giving access to their clients database for the use of the insurance companies. As number of banks in India have begun to act as corporate agents to one or the other insurance company, it is a common sight that banks canvassing and marketing the insurance products across the counters.

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CHALLENGES Increasing sales of non-life products, to the extent those risks are retained by the banks, require sophisticated products and risk management. The sale of non-life products should be weighted against the higher cost of servicing those policies. Bank employees are traditionally low on motivation. Lack of sales culture itself is bigger roadblock than the lack of sales skills in the employees. Banks are generally used to only product packaged selling and hence selling insurance products do not seem to fit naturally in their system. Human Resource Management has experienced some difficulty due to such alliances in financial industry. Poaching for employees, increased work-load, additional training, maintaining the motivation level are some issues that has cropped up quite occasionally. So, before entering into a bancassurance alliance, just like any merger, cultural due diligence should be done and human resource issues should be adequately prioritized. Private sector insurance firms are finding change management in the public sector, a major challenge. State-owned banks get a new chairman, often from another bank, almost every two years, resulting in the distribution strategy undergoing a complete change. So because of this there is distinction created between public and private sector banks. 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 as well as banks, there is a possibility of conflict if both the banks and the agent target the same customers.

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SWOT ANALYSIS
Banking and Insurance are very different businesses. Banks have less risk but the insurance has a greater risk. Even though, banks and insurance companies in India are yet to exchange their wedding rings, Bancassurance as a means of distribution of insurance products is already in force in some form or the other. Banks are selling Personal Accident and Baggage Insurance directly to their Credit Card members as a value addition to their products. Banks can straightaway leverage their existing capabilities in terms of database and face-to face contact to market insurance products to generate some income for themselves, which previously was not thought of.

The sale of insurance products can earn banks very significant commissions (particularly for regular premium products). In addition, one of the major strategic gains from implementing bancassurance successfully is the development of a sales culture within the bank. This can be used by the bank to promote traditional banking products and other financial services as well. Bancassurance enables banks and insurance companies to complement each others strengths as well.

STRENGTHS:
In a country like India of one billion people where sky is the limit there is a vast untapped potential waiting for life insurance products. Our other strength lies in a huge pool of skilled professionals whether it is banks or insurance companies who may be easily relocated for any bancassurance venture. Banks have the credibility established with their constituents because of a variety of services and schemes provided by them. They also enjoy pride of place in the hearts of people because of their long presence and sustained image. Banks also enjoy a wide network of branches, even in the remotest areas that can facilitate taking up the task on a large and massive scale, simultaneously. Banks are very well aware with the psychology of the customers because of their interaction with the customers on regular basis. Because of this the bankers can guess the attitude and diverse needs of the customers and could change the face of insurance distribution to personal line insurance.

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People rely more upon LIC and GIC for taking insurance. If the products of LIC and GIC are provided through bancassurance it would be an added advantage to the insurance companies. With the help of banks trained staff, its brand name and the confidence and reliability of people on the banks, the selling of insurance products can be done in a more proper way. Other than all these things there is a huge potential for insurance sector, as the population of India is high and a large part of it has remained untapped till now. So this can create an added advantage for both banks and insurers.

WEAKNESSES
In spite of growing emphasis on total branch mechanism and full computerization of bank branches, the rural and semi-urban banks have still to see information technology as an enabler. The IT culture is unfortunately missing completely in all of the future collaborations. The internet connections are also not properly provided to the staff. To undertake the distribution of the insurance products, the bank employees have to undergo certain minimum period of training, followed by a test and then get themselves licensed. Moreover the standards of the examination have been raised in the recent past making it difficult for many examinees to clear the same. There is lack of personalized services because the traditional insurance agent is considered a member of the family and hence is able to render a personalized service during and after the sales process. However that may not be the case in regards to a bank employee. There are many differences in the way of thinking and business approaches of bankers and the managers of insurance companies. Banks are traditionally demand-driven organizations with a reactive selling philosophy. Insurance organizations are usually need-driven and have an aggressive selling philosophy. The visit of a customer to the bank is to have a simple transaction like deposit or withdrawal. Busy customers will have no time to have a discussion on a longterm durable purchase like insurance across the counter. Also, the visits in urban or metro branches are going to be fewer because of ATMs and e-banking.

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Another drawback is the inflexibility of the products i.e. it cannot be tailor made to the requirements of the customer. For a bancassurance venture to succeed it is extremely essential to have in-built flexibility so as to make the product attractive to the customers.

OPPORTUNITIES:
There is a vast untapped potential waiting to be mined particularly for life insurance products. There are more than 900 million lives waiting to be given a life cover (total number of individual life policies sold in 1998-99 was just 91.73 million). There are many people in many areas that are still unaware about the insurance and its various products and are waiting that somebody should come and give them the information about it. In urban and metro areas, where the customers are willing to get many services like lockers and safe deposit systems and other products and services from banks, there is a good opportunity to market many property related general insurance policies like fire insurance, burglary insurance and medi-claim insurance etc.

Banks' database is enormous even though the goodwill may not be the same. This database has to be dissected and various homogeneous groups are to be churned out in order to position the Bancassurance products. With a good IT infrastructure, this can really do wonders.

Banks in their normal course of functions lend finance in the form of loans for cars, or for buying a house to clients etc. They can take advantage of this by cross-selling the insurance products and combine it as a package.

Another area that could be of interest to bankers to sell insurance is exploiting the corporate customers and tying up for insurance of the employees of corporate clients, which would be an avenue with easy access. In most cases banks provide salary disbursement and loan facilities but here they can provide insurance cover as well.

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Threats:
Success of a Bancassurance venture requires change in approach, thinking and work culture on the part of everybody involved. The work force at every level are so well entrenched in their classical way of working that there is a definite threat of resistance to any change that Bancassurance may set in. Any relocation to a new company or subsidiary or change from one work to a different kind of work will not be easily acceptable by the employees. Another possible threat may come from non-response from the targeted customers. If many joint ventures took place between banks and insurance companies then it may happen that the customers may not respond to such ventures as happened in U.S. Insurance in India is perceived more as a saving option than providing risk cover. So this may create an adverse feeling in the minds of the bankers that such products may lessen the sales of regular bank saving products. Also selling of investment and good return products may affect the FD Portfolio of the banks. There would be a problem of Reputational Contagion i.e. loss of market confidence towards one in a venture leading to loss of confidence on the other because of identical brand recognition, similar management and consolidated financial reporting etc. If no strict norms are there for such ventures then many unholy ventures may take place which may give rise to tough competition between bancassurers resulting in lower prices and the Bancassurance venture may never break because of such situations. The most common obstacles to success of Bancassurance are poor manpower management, lack of a sales culture within the bank, no involvement by the branch manager, insufficient product promotions, failure to integrate marketing plans, marginal database expertise, poor sales channel linkages, inadequate incentives, resistance to change, negative attitudes toward insurance and unwieldy marketing strategy.

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RECOMMENDATIONS

The Insurance companies need to design products specifically for distributing through banks. Trying to sell traditional products may not work so effectively. The employees of the banks who are selling insurance products must be given proper training so that they can answer to any queries of the customers and can provide them products according to their needs. Banks should also provide after sales services and they should be more aggressive in selling the insurance products. Banks should also do the settlement of claims which will increase the trust and reliability of the customers on the banks. In India, since the majority of the banking sector is in public sector which has been widely responsible for the lethargic attitude and poor quality of customer service, it needs to rebuild the blemished image. Else, the bancassurance would be difficult to succeed in these banks. A formal and standard agreement between these banks and the insurance companies should be taken up and drafted by a national regulatory body. These agreements must have necessary clauses of revenue sharing. In case of possible conflicts, the bank management and the management of the insurance company should be able to resolve conflicts arising in future. For bancassurance to succeed, products and processes will need to be tailored to bank markets, rather than adjusted to insurers specifications. Banks and Insurance companies should apply all the skills and potential in this area and take advantage of the same and they should improve the products from time to time according to the needs of the customers.

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EXAMPLE: SBI LIFE INSURANCE 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% share. They have launched many products so far incorporating certain features that are introduced for the first time in the country. SBI -Life is banking on the bancassurance model on the strength of the SBI Groups 10000 plus bank branches and its vast customer base. In addition it is also tapping other. banks corporate agents and the traditional agency route to penetrate the insurance market SBI Life is planning to introduce more novel and user friendly products to cater to the requirements of the consumers in different segments. SBI has the largest banking network in the county. The bank is looking for business from every customer segment of the bank rural and urban segments, upper, middle and lower income segments /groups and corporate segment. Besides their own channels they are planning to distribute products through other interested banking channels also. It is expected 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 well as ties up with corporate agents (Sundaram Finance). SBI has also introduced 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 2004. SBI Life has implemented an Internet-centric IT system with browserbased front-office and back-office systems, channel management, policy product details, online premium calculator and facility for group insurance customers to view their individual savings status on the Web. The organization has the facility to pay premiums through credit cards, Net banking, standing instructions, etc. This is fully integrated with the core systems through industry standards such as XML, EDI, etc. SBI Life Insurance Company is the first among the 14 life insurance companies in the private sector to consistently reporting profits. There are life insurance players much more aggressive than SBI and they have still not been able to break the record of SBI. Their success is largely on the channel strategy and product strategy. The another aspect is their superior investment performance. They have consistently, over the last two years, generated 11-12 per cent earnings from the investments. SBI Life Insurance is uniquely placed as a pioneer to usher bancassurance into India. The company hopes to extensively utilize the SBI Group as a platform for cross-selling insurance products along with its numerous banking product packages such as housing loans, personal loans and credit cards. SBIs access to over 100 million accounts provides a vibrant base to build insurance selling across every region and economic strata in the country

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CONCLUSION The creation of Bancassurance operations has a material impact on the financial services industry at large. Banks, insurance companies and traditional fund management houses are converging towards a model of global retail financial institution offering a wide array of products. It leads to the creation of 'one-stop shop' where a customer can apply for mortgages, pensions, savings and insurance products.

Where legislation has allowed, bancassurance has mostly been a phenomenal success and, although slow to gain pace, is now taking off across Asia, especially now that banks are starting to become more diverse financial institutions, and the concept of universal banking is being accepted. In India, the signs of initial success are already there despite the fact that it is a completely new phenomenon. The factors and principles of why it is a success elsewhere exist in India, and there is no doubt that banks are set to become a significant distributor of insurance related products and services in the years to come.

The success of bancassurance greatly hinges on banks ensuring excellent customers relationship; therefore, banks need to strive towards that direction. Regulators could explore the possibility of allowing banks having tie-up arrangements with more than one insurance company, giving wider choice for the customers. In addition to acting as distributors, banks have recognised the potential of bancassurance in India and will take equity stakes in insurance companies, in the long run. Going by the present pace, bancassurance would turn out to be a norm rather than an exception in future in India. Adequate training coupled with sufficient incentive system could avert the banks staff resistance if any. In sum, bancassurance strategy would be a win-win situation for all the parties involved - the customer, the insurance companies and the banks.

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BIBLIOGRPAHY http://www.einsuranceprofessional.com/artbuzz.html https://www.insuranceinstituteofindia.com/downloads/Forms/III/Journal2008/ Journal08_%20pg49-54_banc.pdf http://www.ibexi.com/papers/Bancassurance.pdf http://tips.thinkrupee.com/articles/bancassurance-in-india.php