MENTORING REPORT

ON
“AN ANALYSIS OF EFFECTIVENESS OF
BANCASSURANCE AS A DISTRIBUTION
CHANNEL IN INDIA”
Submitted In Partial Fulfillment for the Requirement of Post
Graduate Diploma in Management (PGDM)

SUBMITTED TO: SUBMITTED BY:

DR. KOMAL KHATTER HARSHITA MALIK
(ASSISTANT PROFESSOR,
JIMS KALKAJI) (87/PGDM/KJ/2018)

Mr. AJAY GUPTA

(STANDARD CHARTERED)

Jagannath International Management

School Kalkaji, New Delhi

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DECLARATION
This is to certify that the research report titled “AN
ANALYSIS OF EFFECTIVENESS OF
BANCASSURANCE AS A DISTRIBUTION
CHANNEL IN INDIA” is an academic work done by
“HARSHITA MALIK” submitted in the partial fulfillment
of the requirement for the award of the Degree of “POST
GRADUATE DIPLOMA IN MANAGEMENT” from
“Jagannath International Management School” under the
guidance & direction of Dr. Komal Khatter and Mr. Ajay
Gupta to the best of my knowledge and belief the data &
information presented by me in the project has not been
submitted earlier.

HARSHITA MALIK
87/PGDM/KJ/2018

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ACKNOWLEDGEMENT
Management is a profession wherein no work can be
accomplish without the help and assistance of a large
number of people, be it your superiors or subordinates. A
good manager is the one who knows how to get the work
accomplished with the help of his colleagues. I would like
to thank Dr. J. K. Batra, Director, Jagannath International
Management School, Kalkaji for providing me with this
great opportunity to work on this report. I wish to express
my sincere gratitude to Dr. Komal Khatter and Mr. Ajay
Gupta for their guidance and support during the study and
preparation of the report.

HARSHITA MALIK
87/PGDM/KJ/2018

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EXECUTIVE SUMMARY
The Banking and Insurance industries have changed rapidly in the changing and
challenging economic environment throughout the 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. This has given rise to a new form of business
wherein two big financial institutions have come together and have integrated all their
strength and efforts and have created a new means of marketing and promoting their
products and services. On one hand it is the Banking sector which is very competitive
and on the other hand is Insurance sector which has a lot of potential for growth. When
these two join together, it gives birth to BANCASSURANCE.

Bancassurance is nothing but the collaboration between a bank and an insurance

company wherein the bank promises to sell insurance products to its customers in
exchange of fees. It is a mutual relationship between the banks and insurers. A
relationship which amazingly complements each other’s strengths and weaknesses. It is
a new buzz word in India but it is taking roots slowly and gradually. It has been accepted
by banks, insurance companies as well as the customers. It is basically an international
concept which is spreading all around the world and is favored by all.

Taking all these things into consideration I would like to present my project
“Customers’ Perception Regarding Reliability of Bancassurance” The
project flashes some light on Bancassurance and how it is perceived by people in India.
It deals with the conceptual part of Bancassurance as well as its practical applications in
India. The main focus of this project is on analyze the performance of bancassurance
services and compare the level of customers’ satisfaction from bancassurance services. It
also undertakes problems faced by customers from bancassurance services. The
regulations governing Bancassurance are also dealt with in this project. SWOT analysis
is also done so as to identify the various opportunities and threats for Bancassurance in
India.

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INTRODUCTION

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Bancassurance – Introduction
‘Bancassurance’ as term itself expresses us what does it means. It’s a grouping
of the term ‘Bank’ and ‘Insurance’. It means that insurance industry is going to
start its selling their product through banks. It’s a new concept to India but it is
very extensively used in mostly in developed countries. It is profitable for both
banks and insurance industry and has a very bright future to be the most develop
and efficient means of distribution of Insurance product in very near future.

Insurance industry is selling both life and non-life policies by banks. The share
of premium claimed by banks/insurance is increasing in a method from the time
it was introduce to the India. In India Bancassurance is guided by Insurance
Regulatory and Development Authority Act (IRDA), 1999 and Reserve Bank
of India. Most of banks and insurance company have to meet specific obligation
to get into Bancassurance business.

It is expected by specialists that in future 90% of share of premium will come

from Bancassurance business only. Presently there are more and more banking
and Insurance industry and volunteering into Bancassurance business for better
business prospect in future.

The banking business is also producing more profit by more premium collected
by banks and insurance industry and they also receive commission like normal
insurance agent which rise the profits and better status for the banks as there
service base also increase and are able to provide more service to customers and
even more customer are concerned toward bank.

It is even profitable for Insurance industry as they receive more and more sales
and higher customer base for this sector. And they have to directly deal with an
organization which reduce their burden to deal with customer face to face.
In all Bancassurance has proved to be prosperous in for banking and
insurance industry. Bancassurance is explained as ‘Selling Insurance
products by banks’. The word is a grouping of two words ‘Banc’ and
‘assurance’ signifying that both banking and insurance industry and services
are provided by one corporate sector or by banking company with alliance
with any particular insurance industry. In existing terms bancassurance,
which is also known as Allianz - defines a package of financial services that
is accomplish both objectives; banking and insurance needs at the same time.

The practice of the word selected up as banking and insurance industiy

merged and organized and banks required to provide insurance, in the market
which has been relaxed recently.

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Model of bancassurance

But it is a provocative issue as many experts feels that this ides gives banking
sector too big and control over financial market in India. Therefore it has also
been restricted in many countries too.

But, still which countries have acceptable bancassurance in their market has
seen a wonderful boom in that sector. The share of premium collected by both
banks and insurance industry has increased in constant and decent manner.
This success concurred with a favorable taxation for all types of insurance
products, as well as with the consumers' rising requirements, in terms of
middle and long term savings, which is due to a shortfall of the pension plans
in India.
The relations between bank and insurance takes place through various ways such
as distribution contracts, joint ventures, creation of a company new company
which gives rise to a complete disturbance concerning marketing strategies and
the setting up of insurance products' distribution.

The market has just been opened for the India and there is lot of development
left to be done by the government and regulatory specialist. While this has proven
to be a successful for the Insurance and Banking sector together and both the
different sector of the industry has shown improved result and development in
their own field due coming of the whole new concept of bancassurance.
Bancassurance in its modest form is the circulation of insurance products through
a bank’s distribution networks. It is the facility of insurance and banking products
and service through a mutual distribution channel or finished with same end.

Banks, with their terrestrial spreading perception in terms of reach to customers;

all sections, have emerged as feasible basis for the distribution of insurance
products. It proceeds numerous forms in various countries dependent upon the
demography and monetary and governmental climate of that country. This idea
gained prominence in the increasing global insurance industry and its search for
new channels of spreading business.

However, the development of bancassurance as a concept and its concrete

application in various parts of the world, have frightened up a number of
opportunities and challenges.

The idea of bancassurance was evolved first in Europe. Europe leads the
world in bancassurance market dissemination of banks assurance in new
business in Europe which collect such as 30% in United Kingdom,
approximately 70% in France. Nevertheless, barely 20% of all United States
banks were selling insurance 70% to 90% in many other Western European

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countries. In Belgium, Germany, Spain and France scores more than 50% all
premiums is collected by banks assurance. In Asia, Hong Kong, Taiwan and
Singapore have surged ahead in Bancassurance then that with India and China
taking tentative step accelerative. In Middle East, only Saudi Arabia has made
some delicate shots that even failed to really take off or make any alteration
in the system.
The motives behind bancassurance also vary country to country and sector to
sector. Which reflects banks as means of source of additional fee income and
product diversification. Insurance industry see bancassurance as a tool for
increasing their market spreading, distributions and premium turnover of
course. The customer sees bancassurance as a jackpot in terms of compact
price, high quality products and delivery at the entrance way.
With the liberalization of the insurance sector and struggle tougher than ever
before, companies are progressively trying to come out with better
improvements to stay that one period ahead.
Development has certainly been made as is be seen by the number of
unconventional products deluging the market today - products with eye-
catching premiums, unitized products, unit-linked products and advanced
provisions. But a previously untapped field is the one connecting the
distribution of these insurance industry.
Presently, insurance agents are still the main truck by through which
insurance industry are selling their products. But in a huge country like India,
one is never be too sure about the levels of dispersion of a product. It therefore
marks sense to look at well-balanced, supplementary networks of sharing.
Nationalized insurers are now well recognized and have a widespread reach and
presence. New players may find it exclusive and time overshadowing to bring up a
distribution network to such principles. Yet, if they want to make the most of India's
large populace base and reach out to a valuable number of customers, making use of
other distribution opportunities develop an obligation. All Substitute channels will
help to bring down the costs of distribution and thus benefit the customers.

History of Banking in India

Banking played an important role in the financial set-up of any country and its
economy of its own country. With its large network of branches, giant deposits
and advances, it has found a special place in the money market. Continuing
changes in the banking sector, today it has got an enormous position as a subject
of analysis and research.

Banking means “The accepting, for the resolution of lending or inviting, of

deposits of money from public re-payable on demand or otherwise, and withdraw
able by cheque, drafts orders or else”. Banking meant any company which carries
out the business of banking in India.

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Banking in its simplest form was as old as genuine history. In India reference about
banking practices and guidelines exists in our scriptures and ancient text. It had its
origin as early as in the Vedic period. It was believed that the expansion from
money lending to banking must have taken place even before Manu, the great
Hindu Jurist, who had committed a section of work to deposits, advances, recruits
and policies of credits and loans had also laid down rules concerning to rates of
interest. In the 4th century B.C., Kautaliya’s ‘Arthashastra’ arranged 15 and 60 per
cent as the maximum legal rates of interest per annum on secured and unsecured
loans correspondingly, but permitted a maximum of 240 per cent, if risk was
specifically heavy.

All the different forms such as Hundis or indigenous bills of exchange came into
use during the Medieval Era from 12th century when Muslims ruled India and it
appears from the writing of a few Muslim historians, European travelers, State
records and Ain-i-Akbari that both under the early Mogul rulers in India
indigenous bankers played an important role in lending money, monitory and
financing pattern and foreign trade with cash or bills and giving financial support
to the rulers during the period of crisis. During the Mogul rule, the issue of various
kinds of metallic money in diverse parts of the country gave bankers great
prospects for increasing business of money replacing.

Modem Banking in India was assumed to be developed during the British Era. In
the first half of 19th century, The British East India Company recognized three
banks.

(1) The Bank of Bengal in 1809

(2) The Bank of Bombay in 1840
(3) The Bank of Madras in 1843

In this time, all these three banks also known as ‘Presidency Banks’ were
pooled into a new bank called ‘The Imperial Bank of India.’ Later it was taken
over by the State Bank of India in 1955. Allahabad Bank was the first wholly
owned Indian bank. The Reserve Bank of India was established in 1935
pursued by other banks like Punjab National Bank, Bank of India, Canara Bank
and Indian Bank.

With the expansion of the Indian banking sector, new norms had been
introduced, in order to stay ahead in the rat race. Banks were now getting into
housing finance, securities, net banking, customer finance, merchant banking
and treasury market, etc. They were trying to deliver eveiy kind of service in
order to satisfy their clients.

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Healthy competition had carried in more working expertise in the banking
sector with the entry of different types of other banks such as private and
foreign banks. Banks were also trying to cope up and regulate with time and
were annoying to become one-stop financial superstores. With the initial of
value added and personalized products, the market concentration was shifting
from mass banking products to other types of banking facilities.

The Reserve Bank of India (RBI) was the summit body for the matters
concerning to the Indian banking system. It was the ‘Central Bank’ and was the
enthusiast to all other banks of India. The following were the purposes of
Reserve Bank of India (RBI):

1. Custodian to Foreign Exchange and Gold Reserves

2. Developmental activities

3. Research and Development in the banking sector

4. Currency issuing authority

5. Banker to the Government

6. Banker to other banks

7. Framing of Monetary Policy

8. Exchange Control

Types of banks:

Succeeding is the grouping of banks: -

Central bank.

Central Bank of India is The Reserve Bank which is wholly owned by the
Government. It is managed by a central board which is headed by a Governor,
employed by the Central Government. It offers guidelines for the operational and
funding’s of all banks working within the country.
Private Sector Banks.

The Private Banking sector is divided as: -

1. Scheduled Co-operative banks

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 2. Non-scheduled banks
3. Old Generation private banks
4. New generation Private banks
5. Foreign banks operating in India

Public Sector Banks

The Public Banking sector is divided as below: -

1. 23 nationalized banks
2. Regional rural banks mainly sponsored by public sector banks
3. State Bank of India and its associate banks called the State Bank Group

Development Banks/Financial Institutions

1. Shipping Credit & Investment Company of India Ltd (SCICI)

2. National Bank for Agriculture & Rural Development (NABARD)
3. Export-Import Bank of India (Exim)
4. National Housing Society
5. Small Industries Development Bank of India (SIDBI)
6. North Eastern Development Financial Corporation.
7. Industrial Finance Corporation of India (IFCI)
8. Industrial Development Bank of India (IDBI)
9. Industrial Credit & Investment Corporation of India (ICICI)
10. Industrial Investment Bank of India (IIBI)

Co-Operative Sector

The Co-operative sector is very valuable for rural areas. The Co-operative
Banking sector is divided as: -

1. Urban Co-operative Banks

2. State Land Development Banks

3. State Co-operative Banks

4. Central Co-operative Banks

5. Primary Agriculture Credit Societies.

6. Land Development Banks

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History of insurance in India:

Insurance is a creation in which eliminates risk and which replaces conviction

for insecurity. Insurance is a contract between insurer (insurance company) and
the insured (whose life or assets are covered) under which the insurer agrees to
reimburse the insured for the loss rising from the risk insured against and term
insurance is be defined in both ways financial and legal terms.

In financial sense, “ Insurance is a social method in which group of

individuals(insured) transmissions risk to another party (insurer) in order to
combine loss experience, which permits statistical calculation of losses and
provides for payment of losses from reserves funded (premium) by all members
who transmitted risk.”

In legal sense, “A contract of insurance is a contract by which one party in

consideration of the price paid to him proportional to the risk, delivers security
of the other party that he shall not suffer loss, damage or partiality by the
happening of assured & definite events.”

Insurance in India has an entrenched history. The insurance industry in India had
come in a Ml round from being an exposed competitive market to nationalization
and rear to a liberalized market again. The business of life insurance in India in its
prevailing form started in India in the year 1818 with the formation of the Oriental
Life Insurance Company in Calcutta which was however a British company.

The first Indian insurance company, was The Bombay Mutual life Assurance
society started its operation in 1871. In 1956, the Indian insurance industry was
made up of 154 national insurers, 16 foreign life insurers and 75 provident funds.
The Insurance Act, 1938 was the first legislation prominent all forms of insurance
to provide authoritarian state control over insurance business. In 1956 all life
insurance industry were nationalized, for non-life insurance in India was no
changed. In 1907 the first Indian general insurer, the Indian Mercantile insurance
company started operations. In 1919 The New India Assurance Ltd. was
incorporated, in 1972, the non-life insurance business in the country was
nationalized and the GIC (General insurance Corporation of India) was made with
four subsidiaries: the national insurance, oriental insurance, united India Insurance
and the New India Assurance Company Ltd. Meanwhile then Insurance in India
had an apologetic wall built around it, to keep it a local players market. Today there
are 24 General Insurance industry including Export Credit Guarantee Insurance
industry (ECGC) and Agriculture Insurance Company of India and 23 Life
insurance industry functioning in India. But today also the insurance industry are
trying to internment India’s as not many people are aware of it.

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The insurance sector is increasing at a speed rate of 15-20% and together with
banking and insurance services add about 7% to the country’s GDP. A well -
established insurance sector is a boon for economic growth as it provides long term
deposit for infrastructure development at the same time reinforcement the risk
taking ability of the country.

Types of insurance:

Insurance has two broad categories such as:

(1) Life insurance and

(2) General insurance or non-life insurance

Life Insurance

As Life Insurance Corporation was formed in September 1956. In case of life

insurance business, a long term policy was issued for a number of years or for
the entire life. A life policy covered the risk of death due to natural reasons or
otherwise. In this insurance, a level of premium is normally payable during
the policy period, even though the risk of death will be growing with the
advancing age of the life secure. The type of policy will be indomitable by his
age at the time of executing the policy and amount of premium. The premium
may be rewarded by single payment or annually, half yearly, quarterly or
monthly that’s depends on the situations.

General Insurance:
General Insurance business was practiced in 1972. The present general
insurance products is be grouped as: -

1. Personal Accident

2. Engineering Insurance

3. Rural Insurance

4. Miscellaneous Insurance

5. Fire Insurance

6. Marine Insurance

7. Motor Insurance

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 8. Health Insurance

Functions of Insurance

Primary functions of insurance

1. Evaluating risk

2. Providing certainly

3. Providing protection

4. Collective risk bearing

Secondary functions of insurance

1. Cover larger risks with small capital

2. Helps in the development of larger industries
3. Prevent losses
4. Other functions of insurance
5. Risk free trade
6. Saving and investment tool
7. Medium of earning foreign exchange.

Meaning and Origin of Bancassurance:

The rising global insurance industry has brought new channels of distribution into
presence, leading to a new model. Now a days banks are also trying to increasing
their business to safekeeping and insurance and other sectors by adding new variety

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of products. Bancassurance, is another option, has gained acknowledgement in the
recent years.

Bancassurance means not only selling of insurance products by banks but also in this
agreement, insurance industry and banks go through a tie-up and consequently
allowing banks to sell the insurance products to its existing customers. In this system
a bank has a corporate tie-up with one insurance company to sell its products.
Bancassurance is the distribution of insurance products through the huge network of
banks whereas, banks act as a distribution channel for given that ranges of banking
and investment products and services. In simple words it can be say that
bancassurance tries to develop synergies between both - insurance industry and
banking sector.
(1) The bank, (2) The insurer and (3) The customer.
By selling insurance policies bank earns a revenue stream apart from interest. It is
called as fee-based income. This income is purely risk free for the bank since the
bank merely plays the role of an agent for sourcing business to the insurance
company.

What is bancassurance?

Bancassurance is the delivery of insurance products through a bank's distribution

networks. It is a service that satisfy all customers, banks and insurance needs at
the same time. Bancassurance as a perception first originated in India when the
insurance industry opened up to private contribution in December 1999. There
are basically four models of bancassurance which are as follows

 Amalgamations between a bank and insurer

 Bank constructs or buys own insurance products

 Spreading alliance between the insurance company and the bank

 Joint venture between the two or more companies, Most of the

bancassurance procedures fall in the first model.

How does it help?

 Each insurance company had a wants to grow quickly to reduce painful

start- up expense invades. Banks with their huge networks and large
customer databases give insurers a prospect to do this professionally.

 It gives the companies a chance to tap the rural region. Selling insurance
through traditional methods in these sectors drops very exclusive. A tie

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 up with a bank with a suitable customer base is give an insurer a cheap
access to these areas.

 Bancassurance enables to have an enormous tarn of skilled professionals.

 The restrictions of the banks in their core advancing business are

declining harshly. Prospects like bancassurance supplement their income.

 Bancassurance permits to improve a sales philosophy within the bank and

it helps to change the traditional attitude of banking companies.

Though a comparatively new concept, bancassurance has been a remarkable

realization in most of the cases. Presently banks are not just lending organizations
but are emerging as more varied financial organizations. The distribution of
insurance products through banks has been favorable to both insurance and
banking companies as well as for the customers.

Why should banks enter insurance?

There are numerous reasons why banks should seriously consider Bancassurance,
the most significant of which was improved return on assets (ROA). One of the best
ways to growth of ROA, assuming an endless asset base, was through fee income.
Banks that build fee revenue was cover more, of their operational costs, and one
way to build fee income was through the transaction of insurance products. Banks
that efficiently cross-sell financial products was influence their distribution and
dealing out capabilities for commercial operating expense ratios.

By leveraging their powers and finding ways to stun their weaknesses, banks have
to modification the face of insurance delivery. Sale of personal line insurance
products through banks meets a significant set of consumer needs. Mostly banks
were engendered a great deal of trust in broad divisions of customers, which they
was control in selling them personal line insurance products. In addition, a bank’s
branch setup allows the face to face contact which was very important in the sale of
individual insurance. Another advantage banks have over traditional insurance
distributors was the lower cost per sales increment made possible by their
substantial, loyal customer base. Banks also appreciate important brand awareness
within their geographic regions, again given that for a lower per-lead cost when
publicity through print, radio and/or television etc.

Other bank assets are their promotion and dispensation capabilities. Banks have
widespread practice in marketing to both existing customers (for retention and cross
selling) and non-customers (for acquisition and awareness). They also have access
to numerous communications straits, such as statement inserts, direct mail, ATMs,

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telemarketing, etc. Banks proficiency in expending expertise has caused in
enhancements in contract processing and customer package.

By productively mining their customer databases, leveraging their standing and

'distribution systems’ (branch, phone, and mail) to make actions, and developing
'sales methods’ and products personalized to the market, Banks have more than
folded the transformation rates of insurance leads into sales and have improved sales
productivity to a ratio which was more than adequate to make Banc assurance a
highly commercial suggestion.

Banks and insurance companies have to follow following Legal

Requirements:

RBI guideline for banks arriving into insurance sector delivers three options for
banks.

Any commercial bank is allowed to undertake insurance business as agent

of insurance companies. This will be on a fee basis with no-risk contribution.

 For banks which are not qualified for this joint-venture option, an
investment opportunity of up to 10% of the net worth of the bank or
Rs.50 crores, whichever was lower, and

 Finally, Joint ventures will be allowed for financially solid banks

wishing to commence insurance business with risk participation;

Following are guidelines for the bancassurance by The Insurance Regulatory

and Development Authority (IRDA)

 Commercial banks, cooperative banks and regional rural banks may

become corporate representatives for one insurance company.

 Banks cannot become insurance brokers.

 Each bank that sells insurance must have a chief insurance executive
to hold all the insurance activities.

 All the people involved in selling should under-go compulsory

training at an institute recognized by IRDA and pass the examination
accompanied by the authority.

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The Power of Bancassurance

In the last few years the convergence of financial services has become a
reality. One of the major trends in the insurance sector has been the growth
of bancassurance. With all insurers trying to expand their distribution reach
as quickly as possible, tie-ups with banks affords a quick and effective way
in order to reach customers. For banks operating on thin margins
bancassurance offers fee income due to cross sales apart from increasing
customer retention. Any good bancassurance strategy has to have technology
to harness the benefits accruing from the tie-up.

Business Issues

• Increasing complexity of Channel

Integration for insurers and banks With Bancassurance resulting in tie ups across
one or many banks for an insurer, integrating front end applications of the banks
with the back end. Processing applications of the insurer becomes a must. Piece
meal approach without strategic thinking will only result in spiraling costs and sub
optimal results from channel integration.

 Need to introduce new products,

Unlike traditional agency channels which were limited by their “catchment” area
insurers now have a customer data base which was potentially lead them to tap an
entirely new set of customers? Insurers need to design new products keeping this
clientele in mind.

 Need of transactional simplicity

In order to fully realize the potential of its reach, an insurer needs to push as much
of processing work to the point of sales. Simplified underwriting, provisional
certificates, pre-qualification criteria are a must. Such flexible process requires an
integrated, robust and flexible IT backbone.
 Need for optimizing Sales

Banks need systems that was provide them help in training and improve sales pitch
to sell third party products. They also need support for accounting and data
exchange with third party product provide?

 Customer & Agent Retention

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 While retailing third party products was provide customer stickiness, a holistic
customer experience need to be supported for any information anci transaction
required by the customer. For agent retention a robust share of premium into right
incentives and commissions was necessary.

Practices in bancassurance

Bancassurance was the facility of insurance and banking products as well as

services via the banks distribution channels to the same customer base.

Dominance of bancassurance, factors are following:

• Customers often place a high degree of faith in banks

• Wide-ranging bank networks

• Banks have generally a positive Image in the eyes of customers

• Banks are visited frequently

Barrier of bancassurance, external factors are such as

 Supremacy of IFAs

 Tough guidelines

 Low compactness of bank branches

 Adverse status through mortgage benefaction scandals

External factors for the development of Bancassurance

 Guideline favors life products

 Clients value such as “face - to - face” advice

 Banks have always a positive image

A new development: Assure Banking, Bancassurance needs a variety

of considerations

 Local financial services market and regulations

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  Form of linkage between insurance and bank

 Current sales culture within partner bank

 Existing practices and competencies/expertise (including IT)

 Corporate objectives (bank - insurance)

 The products and distribution channels

 Customer base

 Impact on existing distribution channel of insurance company

Reasons for entering into Bancassurance

 Regulatory changes

 Decline in profitability => new source of additional income for the bank

 Competition

 Better use of bank networks

 Shift in customer’s savings preferences

Other factors which favor the role of banks as distributors of insurance products

 Banks have mostly a positive image in the eyes of customers

 Clients often place a high degree of trust in banks
 Frequent contacts between the bank and their clients
 Governments encourage people to take out their own old-age pension schemes
(tax advantages)
 Existing infrastructure (bank branches) to sell insurance products

Will bancassurance click?

Bancassurance, is most probably based on channel of distribution of
insurance and facilitate through banks that originated and which has been
a success story in India. Many insurance companies have already tied up
with banks and some other are planning to connect with banks; that have
already highlighted off bancassurance through promotions of select risk
services.

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Bancassurance in India - A SWOT Analysis

Banking and insurance are two different industry but both are mostly related to
investment, revenues and saving and security. Banks have smaller risk in business as
compared to the insurance companies however, in India bancassurance as a means
distribution of insurance products by bank which are already in force in some form or
the other. The functions of bancassurance is differ like banks perceive bancassurance
as a means of product diversification and a source for additional earning fee income.

While Insurance industry use it as a tool for increasing their market

penetration and premium turnover and growth and reach of the business. But
today’s customers was expect improved premium rates and better-quality
services delivered at their less efforts. So, bancassurance is the middle way
that everyone was getting benefited here.

Even though, banks and insurance industry' in India are not work as like yet
to exchange their wedding rings, Bancassurance is only explained as means
of distribution of insurance products to the bank’s customer; which makes to
get both profitable. Banks are selling different type of insurance such as
personal accident and baggage insurance directly to their Credit Card
members and as a value addition to their products. Banks also participate in
bancassurance for the distribution of mortgage linked insurance products like
fire, motor or cattle insurance to their existing and prospects customers.
Banks are working as straightaway leverage to their existing capabilities in
terms of database and face to face contact to market insurance products to
generate additional income for them.

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Once Bancassurance was incorporated in India with full strength, there is
requirement of huge capital investment to create infrastructure particularly
in case of IT, HR training and telecommunications, a call center, top
professionals of both industries will have to be hired. For R & D cell will
need to be created to generate new ideas and products and also helps to create
new plans and schemes.

Appling bancassurance effectively was help the banks and insurance industry
to develop a sales culture and healthy work environment and focus to
customer’s benefits. Older phenomenon of bank to promote traditional
banking products and other financial services but now Bancassurance helps
banks and insurance industry to perfectly complement each other’s strengths
and opportunities for doing business. Therefore experimenting the
bancassurance is essential and here researcher have a SWOT analysis done
in the context of India.

Strengths

In our country there are huge amount of people, use insurance products for
different reason. This is very true that mostly are willing for particularly for
life insurance products but other all different types of insurance products are
similarly important.

This is also true that many people are waiting for it but they were not properly guided
or untapped by the insurers. Millions of people travelling in and out of India but it
was to be tapped for Overseas Med claim and Travel Insurance policies. The
insurance industry worldwide are eyeing on this, why not Indian anticipate this move
by doing it ourselves?

Our other strength lies in a huge skilled professionals whether it was banks or
insurance industry who may be easily repositioned for any Bancassurance
undertaking. LIC and GIC only two have a good range of personal line products
already lined up, but population require more therefore R & D efforts to create new
products will be minimal in the beginning.
 A huge population was lying ahead, such as India to make the prospects of
bancassurance insurance products.
 Large number of skilled professionals, who may easily be combined together
for any bancassurance scheme.
 Banks have the reliable and consistent database to establish with their
customers.
 Banks have variety of services and schemes provided to their customers that
helps to motivate towards bancassurance.

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  Banks have the benefit of their wide network, high range of branches, in the
remote areas also that was help them to appliance a specific task on a large
and enormous scale.
 Banks also enjoy the pride of many people because of their reputations and
continuous image.
 Interaction with the customers on regular basis, are well aware of the
psychology of their clients. This was always help to the bankers to predict
the approach and needs of the customers which help them to change the face
of insurance distribution networks.
 People are having more trust only on Life Insurance Corporation of India
(LIC) and General Insurance Corporation of India (GIC) for taking insurance
and the products of LIC and GIC are moved over bancassurance, this would
deliver a supplementary advantage to the insurance industry.
 Banks are always taking the advantage of their brand name, reputation, and
trained staff and reliability of people and of course huge volume of customer
linkage and database for selling of the insurance products in a more refined
way.

Weaknesses

In India all growths and development is not performed due to less IT culture,
it is unfortunately missing, have less skilled professional; all can completely
fail in all of the future collaborators. A late developing seems to have
originated upon but it was a case of too late and too little. Straightforward IT
requirement many technology such as networking was not in proper
consideration and implemented, while we need today high range of Wide
Area Network (WAN) and Vast Area Network (VAN) proper Wi- Fi
connections, Internet connection, which are not available, even to the senior
management of the companies.

The middle class population that are having less knowledge and less amount
of money and of course they have different mindset, they thought insurance
is overburdened, they faced first by inflationary pressures on their pockets
and then by the tax mechanism of India. Only one question is always in their
mind that “Where was the money left to think of insurance?” Providentially,
LIC schemes get income tax exemptions personal line products from GIC
med claim already has this benefits.

Another downside of the bancassurance was the inflexibility of the products

it cannot be modify as per the requirements of the customer. For a
Bancassurance scheme to succeed it was. Tremendously important to build
an elasticity so as to make the product attractive to the customer

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  India have the good knowhow in IT industry but of the growing importance
on all branches and their mechanism and full computerization and automation
of bank branches, the rural and-semi-urban banks are still to see information
technology (IT) as a facility . The IT technology was unfortunately missing
partially not completely in all of the future collaborations. The internet
connections are not properly provided this is again the problem faced by
banks.
 Training is provided to the staff but in order to deal out insurance products,
the bank employees have to experience a definite period of training that could
to be followed by a test and licensed. Furthermore, the standard of inspections
has not been clearly defined.
 Banks are conventionally ‘demand driven’ organizations and have active
selling attitude while insurance companies are usually ‘need driven’ and have
a hostile selling viewpoint. So there are many differences in the way of
thinking between bankers and people of insurance industry.
 Usually, customers visit to bank for doing simple transactions like deposit or
withdrawal but working customers will have no time to have discussion on a
purchase like insurance, plans, policies etc. across the counter.
 Last but not the least weakness was the inflexibility in the plans schemes,
procedures and formalities that demanded by the customers. For succeeding
in the plans of bancassurance should be more flexible, so as to make the
product can reach to target customers.

Opportunities

Banks' database was massive even banks have the profitable as they have goodwill
may not be the same as insurance industry. This database has to be dissevered
variously and various consistent groups are to be mixed out in order to position the
Bancassurance products. With a good information technological infrastructure, this
was help to promote bancassurance.

Like developing economies like India, Malaysia, Thailand and Singapore

have already performed very well in bancassurance that may lead the
business in other countries also. There should be an atmosphere that created
liberalization and there appears to be a political agreement to the subject in
the country. Therefore, RBI or IRDA should have no disinclination in
permitting the bancassurance. It may be in the form of merger or acquisition
or a joint venture for creating a subsidiary by the party or just the working
alliance between banks and insurance companies.
• There are many places such as rural or remote area’s people in the
country who are still unaware about insurance, utility of insurance and
its various benefits and they need someone who guide them.

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 • Many customers are willing to take advantage of many services like
lockers, safe deposits schemes and additional products and services
provided by the banks in areas of country. This create a great linkage
between banks and customers that provides an excellent opportunity
to promote bancassurance.

• Banks provide finance to their customers in the form of loans, buying

a house and many more; banks can take advantage of this by cross-
selling insurance products with the attractive packages.

• Bank have the wide range of the corporate customers, which will
promote insurance by taking advantage and tying up for the insurance
of the employees. Usually, banks offer saving, deposits and loan
facilities but they can also provide insurance. This may prove to be a
good viewpoint and easy access of customers by the bankers.

Threats

Success of a Bancassurance project requires change in method, thinking and work

culture of all the parties that involved in it. Work force at every level are not only well
ingrained in their standard way of working that there was a certain danger of resistance
to change in any type of working style that Bancassurance may set in. Any location of
company or subsidiary or change from one work to a different kind of work will be
resented with strength.

The investors of the capital may turn their face off in case the rate of return (ROR)
on capital falls due to short of the existing rate of return on capital. As banks and
insurance industry also admitted that people have to invest major portion of their
income, and they willing the returns from their investments. And also if the unhealthy
alliances are to take place to existence, there will be aggressive competition in the
market, that resulting in lower prices, low growth and less accepting of the
Bancassurance project and it will never leads from its break-even.
 Success of a bancassurance undertaking requires change in method, thinking
and work culture on the part of everybody involved. The banks are so well-
established at every level, bancassurance is new set-up which may not
considered by their existing customers. Any rearrangement of existing
system for a new strategy was be offended with intensity.
 Second possible threat may come from no or less response from the target
customers/ existing customers.
 Insurance in India was more acceptable due to its saving and investment
option rather providing risk cover. To change the mindset of their customers
and that may leads to create an adverse effect in the minds of the customers

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 and bankers too, that may the reason for reducing the sale of regular income
of the bank like saving products.
 Lastly the most common difficulty to the accomplishment of bancassurance
are poor manpower management, poor training methods, lack in sales culture,
lack of motivation for doing work, no involvement of the branch manager,
insufficient product promotional strategies, failure to integrate marketing
plans, inability to database management, poor sales channel linkages,
inadequate motivations, conflict to change, undesirable attitudes towards
insurance and strong marketing strategy etc.

Benefits and value proposition of bancassurance

Advantages to bank:
 Volume of productivity should be increases of the employees.
 To provide customers with both the services such as insurance and banking; at
same place, that was great improvement in overall customer satisfaction
resulting in higher customer retaining levels.
 Rise in return on assets by building additional income through the sale of
insurance and banking products.
 Face-to-face contacts and awareness about the financial surroundings with
customers that increase the sale of insurance products.
 Banks usually used cross selling insurance products for example, Term
insurance products with loans and many more.

Advantages to insurers
 Insurers was exploited by the banks’ due to wide network of branches
for distribution of products and database of customers. The
perception of banks branches into not only in the rural areas but also
at all the cities and small cities that was be developed high sales
volume.
 Customer database such as customers financial status, spending
habits, investment portfolio and purchase/ sales capability was be
used to modify products and offered them accordingly.
 As banks have already reputable and established relationship with
their customers, and conversion ratio of frontrunners to sales was
likely to be high and also service aspect was be tackled easily such
as awareness of new policies, schemes etc.

Advantages to consumers
 Complete financial advisory services at one place i.e., insurance
services along with all other financial and banking services such as
banking, mutual funds, home loan, personal loans etc.

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  Improved accessibility on the part of the protected
 Banks are very regular to their work so it create its loyalty to its
customers.
 Advanced and new high quality product ranges available to its
customers.

The other benefits include

 Best way to customer retention and having strong relationships with their
customers
 New opportunities as competitive advantage in the rural areas and new
locations in cities.
 Insurance products was augment the value of the banking products and
services.
 Banks are always in better position to offer complete cohesive and advanced
financial services, or plans to their target customers

What products do bank employees like?

 Easy and complete premium calculations
 Sales in high volume
 Good selling points as a banker
 Customer database is maintained so easy to recognized their clients
 Terms and conditions clearly defined
 Benefits are explained
 All alternatives are communicated to Bank employees like:

Marketing and Distribution Channels in Bancassurance

There are the most significant changes in the financial services sector/
financial institutions that over the past few years has been the high growth and
development of bancassurance. Banking sector and insurance industry have
found bancassurance to be an attractive and profitable supplement to their
existing portfolio. The successes demonstrated by various bancassurance
facilities particularly in India have triggered an inundation of mergers and
acquisitions crosswise regions and efforts are on to reproduce the early success
of bancassurance as good in other parts of the world.

Distribution networks, and database of customers were the key issue in

bancassurance and was closely linked to the governing environment of India.
Recent years, supervisory and controlling barriers between banking and
insurance have weakened and has created a climate progressively friendly to
customers. The passage stimulated the development of bancassurance by

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permitting use of multiple distribution networks by banks and insurance
companies.

Bancassurance experience in other countries as well as in India offers valuable

guidance for those interested in insurance, and its distribution through the
banking channel in developing countries. Many banks and insurance
companies are beholding with great interest at building new revenue through
bancassurance - including large, modem/traditional companies that did not
want to considered, and have measured such an approach. On the particular
interest, many experts believe, that there was the potential in bancassurance
business in developing countries, rural areas and many other potential areas.

Distribution channels in Bancassurance

Traditionally, insurance services have been promoted and sold essentially

through agency systems in many countries that is essential as per their law. With
new expansions in consumer’s behavior’s growth of technology and de-
regulation, new distribution networks have been established fruitfully and
quickly in recent years. Bancassurer makes great use of following distribution
channels:
1. Direct Response

2. Internet

3. e-Brokerage

4. Outside Lead Generating Techniques

5. Career Agents

6. Special Advisers

7. Salaried Agents

8. Bank Employees / Platform Banking

9. Corporate Agencies and Brokerage Firms

Key driver of Bancassurance

Elsewhere in Asia has been the following. Banks are seeking ways to raise
additional earnings without commitment of additional capital in a low interest rate
environment; increased competition; reducing margin. Insurance industry are

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seeking new customers using new distribution activities to reach such segment.
As noted above, the biggest driver in India was different at present: banks are
seeking an alternative' method of redeploying their surplus workers. Of course,
this was a one-time only phenomenon. Therefore, over time, we will see other
factors that have played important roles in other countries will also play out in
India. It might be instructive to examine what succeeded in America for the
expansion of bancassurance business. A survey by LIMRA identified the
following elements for success of bancassurance:
> Strength of the Brand.

> Sales Staff Management/Training.

Requirements for success in Bancassurance

> Attractive Insurance Product Base

> Cost-Efficient Distribution System
> Linked and Leveraged Bank and Insurance Products
> Concurrent Sale of Bank and Insurance Products
> The Branch Network/Geographical Coverage.
> Bank and Insurance products form a complementary range.
> Single view of the customer.
> Focus on Customer Service/satisfaction.
> Use of Customer Relation Management Tools and Techniques.
> Integration of the bank and insurance organizations producing a single
culture.
> Providing advice/solutions, not selling products.

> Appropriate Structure Based on Level of Integration Between Bank and

Insurer

Achieving Success

To achieve the level of success of bancassurance, banks will need to own

insurance industry or work very closely with insurance company partners to
restructure the value chain and provide products suitable for bank customers.

As long as regulatory constraints exist, alliances will be a critical part of the effort
by US banks to establish their insurance business. Banks must develop successful
alliances in the near term and use those experiences to evaluate the opportunity
to buy or build insurance industry as regulations changes.

There are five key approaches to forming insurance partnerships that form a
continuum from complete outsourcing to complete ownership: list rental,

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working with a third party marketer, agency purchase, integrated alliance, and
ownership. Each of these approaches involves a different level of value chain
ownership and control. To achieve success in bancassurance, Asian companies
must overcome a host of challenges. Some are cultural, while others reflect a lack
of incentives to generate sales as well as the natural conflicts between banking
and insurance products. The most successful products from a sales perspective
are those that are linked to banking products (e.g., loans and credit insurance) or
that are very similar to banking deposits (certainly in the initial stages of the
bancassurance operation) and offer superior returns to deposits, albeit over a
longer term than the usual time deposits.

Some obstacles are country specific. For example, in South Korea, each
bancassurer must have at least three life partners and three non-life partners, and
all of these partners must receive less than 50% of the new business generated
by the bank, in their respective sectors, in any given quarter.

Notwithstanding the many obstacles to success and challenges faced,

bancassurance ventures have enjoyed success in Asia. For example, Exhibit 3
shows the impressive emergence of bancassurance in Hong Kong. Prior to 1999,
market share attributable to bancassurers was minimal.

Indian Context

In India, no company was allowed to transact both insurance and banking

business. They are kept separate. In fact, even a company registered, as an insurer
has to choose between life and non-life business. It cannot do both: Therefore,
the banks in India cannot have the advantages, which are available in the
European context.

There are joint ventures in India between banks and foreign insurers. State Bank
of India, HDFC, ICICI and Vysya Bank are example. But apart from a greater
willingness to help each other, the joint venture will not give either party a greater
advantage in the other's business. The joint venture was an entirely independent
unit of Operation with separate personnel and funds and subject to different
regulations.

The only way in which banks was be associated with the insurance business in
India was by becoming a corporate agent, for remuneration. The bank was do so
for a particular life insurer and/or particulars non-life insurer. The bank cannot
develop any of its intimate contacts with the customers. Since 2000 many banks
and insurers have agreed to arrangement for mutual benefits.

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The LIC has tied with more than one bank. So also have other insurers for more
than a hundred years. Insurance business had been sold through insurance agent
and their supervisors. This system had not been very satisfactory. The LIC
inherited these system .The efforts to make the agents more professional had not
yielded very satisfactory results, despite incentives and training programs. Many
of them continue to treat the agency business casually, as just a source of
additional income. The turnover had been high and the efforts of replenishing the
strength, costly. The banks have skilled staff, to which the procurement of
insurance was reassigned as a duty. This was an opportunity made available after
the regulation of IRDA

Bancassurance in India

Bancassurance commonly means selling insurance products under the same roof
of a bank. Though bancassurance had roots in France in the 1980s, and spread
across different parts of Continental Europe since, it has spread its wings in Asia
- in particular, in India.

In India, there are a number of reasons why bancassurance could play a natural
role in the insurance market. First, banks have a huge network across the country.
Second, banks was offer fee-based income for the employees for insurance sales.
Third, banks are culturally more acceptable than insurance companies. Dealing
with (life) insurance, in many parts of India, conjure up an image of a bad omen.
Some bank products have natural complementary insurance products. For
example, if a bank gives out a home loan, it might insist on a life insurance cover
so that in case of death of the borrower, there was no problem in paying off the
home loan.

Bancassurance was: “The provision of a complete range of banking, investment

and insurance product and services, to meet the individual needs of the customers
of the bank and its associates.”

Table: Some important bancassurance tie – ups

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 INSURANCE BANKS

Corporation Bank, Indian Overseas

Banks, Centurion Bank, Satara District
LIFE INSURANCE CORPORATION Bank, Cooperative Bank, Janata Urban
(LIC) Cooperative Bank, Yeotmal Mahila
Sahkari Bank, Oriental Bank of
Commerce.
The Bank of Rajasthan, Andhra Bank,
BIRLA SUN LIFE INSURANCE Bank of Muscat, Development Credit
Bank, Deutsche Bank and Catholic Syrian
Bank.
Canara Bank
DABUR CGU LIFE INSURANCE Canara Bank, Lakshmi Vilas Bank,
COMPANY PVT LTD American Express Bank, ABN Amro
Bank

HDFC STANDARD LIFE INSURANCE Union Bank of India.

CO

Lord Krishna Bank, ICICI Bank, Bank of

ICICI PRUDENTIAL LIFE India, Citibank, Allahabad Bank, Federal
INSURANCE CO. Bank, South Indian Bank, Punjab &
Maharashtra cooperative Bank.

NATIONAL INSURANCE CO. City Union Bank

MET LIFE INDIA INSURANCE CO. Karnataka Banks, The Dhanalaxmi Bank,
Jammu and Kashmir Bank

SBI INSURANCE CO. State Bank of India, Associate Bank

BAJAJ ALLIANZ GENERAL Krur Vysya Bank, Associate Bank

INSURANC

32 | P a g e
 ROYAL SUNDARAM GENERAL Standard Chartered Bank, ABN Amro
INSURANCE CO. Bank, Citibank, Amex and Repco Bank

Bancassurance: Taking the lead

In the last financial year, India has experienced a substantial growth in the life
insurance business. The new business premium growth rate for the financial year
2004-05 over the previous financial year was 36%. This growth was primarily
due to the aggressiveness witnessed in the private life insurance sector, which
grew by 129%.

One of the drivers for this substantial growth was the contribution of the banking
industry. The private life insurers have been instrumental in building strong
relationships with established banks for bancassurance. The bancassurance
model, in simple terms means distribution of insurance products by banks to their
customers. Apart from having the advantage of reaching out to the potential
customers at the remotest of places, it offers a complete basket of financial advice
to customers under one roof.

Bancassurance has been a successful model in the European countries

contributing 35% of premium income in the European life insurance market. It
contributes over 65% of the life insurance premium income in Spain, 60% in
France, 50% in Belgium and Italy. In the US, the banks were earlier not allowed
to sell insurance due to the restrictions imposed by Glass-Stegall Act of 1933,
which acted as a Chinese wall between banking and insurance. As a result of this
life insurance was primarily sold through individual agents, who focused on
wealthier individuals, leading to a majority of the American middle class
households being under-insured. With the repealing of this Act in 1999, the doors
were opened for banks to distribute insurance and cater to the large middle class
segment

In the Asian markets, bancassurance has a limited share of the total sales primarily
because of the near monopoly of the life agents in Japan, which was the largest
life market. But there was a shift in stance with markets like Japan, South Korea
and the Philippines where bancassurance was previously prohibited, taking a
more accommodating stance towards this channel. It has been estimated that
bancassurance would contribute almost 16% of the life premium in the Asian
markets in the year 2006 primarily due to the growth expected in India and China.
In India the bancassurance model was still in its nascent stages, but the
tremendous growth and acceptability in the last three years reflects green pasture
in future. The deregulation of the insurance sector in India has resulted in a phase

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where innovative distribution channels are being explored. In this phase,
bancassurance has simply outshined other

The Problems in Bancassurance

Any bank getting into business of selling insurance cannot afford to have casual
approach to it. The staff, if deputed from within the existing bank staff, will have
to be specially trained in the intricacies of insurance and the art of salesmanship.

The amount of business acquired through the banks depends entirely on the
personal skills of specified persons and the corporate insurance executives. An
effective and successful specified person might perhaps find it more remunerative
to branch off as an insurance agent on his own, instead of being tied to the bank.
The options available to the bank to prevent this may lie in developing attractive
compensations packages. The relevant issues will be the restrictions imposed by
insurance Act as well as relative pressures within the unions of banks of
employees.

The commitment of senior management was crucial to the success of the persons
deputed for the insurance work. The priorities for the managers may depend on
the criteria by which they will be appraised at the end of the year. If the progress
in insurance was not important criterion, the support to the insurance activities
may be reduced. They would see mainstream banking activities as more
important for then-own future growth. The appraisal and reward systems of the
bank have to be appropriately aligned.

The Future of Bancassurance

Although bancassurance ventures in Latin America and Asia have followed

different paths, they share the same objectives and requirements for success.

All recognize the value of the bank’s customer base. Bancassurance will
eventually take hold in the US. The objectives announced when Bank One
acquired Zurich Insurance Operation point to bancassurance as a fundamental
reason behind the acquisition. Experiences in both Latin America and Asia may
prove valuable to banks and insurers entering into bancassurance ventures in the
US and elsewhere.

Implementation of Bancassurance-Key challenge to India:

At present, the Bancassurance was facing problems such as poor management,

lack of call centers, no personal contact, inadequate infrastructure, and inadequate
incentive to agents and in complete fulfillment of other essential requirements.

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Hence following points was take into consideration for proper implementation of
Bancassurance:

1. There should be involvement of top management in banks.

2. The banks should motivate and develop the skills of staffs at the operating
level

3. If there was any possible conflicts of interest between banker and insurer.
That has to be resolved.

4. Banks have to set up a consistent Distribution procedure with manual

systems in banks.

5. Service level agreements between banker and insurer should be established.

6. High Capital investment in Information and Technology and

Telecommunication.

7. Study about low income groups, middle and upper class of the society and
their eagerness to adopt insurance policies and provide favorable policies to
people.

8. Establishment of Research and Development Cell for adaptive task.

With the opening up of insurance sectors and other players entering into insurance
business, the insurance industry have to come up with well-established
infrastructure facilities, with good call center senders, services which attract and
provide information to customers regarding different good policies and their
premium pay plans. Hence, the success of the bancassurance depends on the
understanding of insurer and the bank by capturing the opportunity and providing
better services to the consumers.

The life Insurance Industry in India has been progressing at a rapid growth since
opening up of the sector. The size of country, a diverse set of people combined
with problems of connectivity in rural areas, makes insurance selling in India
was a very difficult task. Life Insurance industry require good distribution
strength and tremendous man power to reach out such a huge customer base.

Where legislation has allowed bancassurance had mostly been a phenomenal

success and although slow to gain pace, was now taking of across Asia,
especially now that banks are starting to become more diverse financial
institution and the concept of universal banking was being adopted.

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In the field of bancassurance banks will bring a customer database, leverage their
name, recognition & reputation of both local and regional levels... If they are
using personal contact with customers and non-customers then only they was
success in the field of bancassurance. But the proper implementation of
bancassurance was still facing so many hurdles because of poor manpower
management, lack of call centers, and no personal contact with customers,
inadequate incentives to agents and un-fulfillment of other essential
requirements. Finally we was say that the bancassurance would mostly depend
on how well insurers and bankers understanding was with each other and how
they are capturing the opportunity and how better service them are providing to
their, customers.

Effectiveness

The degree to which objectives are achieved and the extent to which targeted
problems are solved. In contrast to efficiency, effectiveness was determined without
reference to costs and, whereas efficiency means "doing the thing right,"
effectiveness means "doing the right thing."

It introduce two importance concepts related to business growth- efficiency and

effectiveness. Both are vitally important! In a nutshell, here are the definitions:

Efficiency: Doing things right to produce consistent and rapid results

Effectiveness: Doing the right things to produce the results you want

Efficiency was important for profitability. Effectiveness was important for growth.
As business owners are always looking for ways to increase profitability. Business
should be documenting our processes and systems, and then should engage our team
in brainstorming ways to do things more efficiently. By increasing efficiency save
both time and money, thus making our businesses more profitable. Effectiveness was
important for growth. One of favorite quotes comes from Peter Drucker, said:

“There was nothing as useless as doing efficiently that which should not be done at
all.”

Some of us are “bent” toward efficiency, which was be a really good thing. Some of
our team members are bent toward efficiency which was also excellent. However, if
we’re doing the wrong things we will not get the results we want! So stop and
honestly ask yourself, “Am I getting the results I really want?”

The best way to improve efficiency was to measure and evaluate all of your processes
and systems. Again, your employees and team members was be great help here. If

36 | P a g e
you ask them you may be surprised how insightful they was be. Also, if they feel like
they are making a meaningful contribution, they will have more pride and a higher
level of ownership of the outcomes. So engage your team to start documenting,
measuring, and evaluating every critical process in your company. As you become
more efficient you will discover new capacity for production and profitability. The
best way to improve effectiveness was for you as a leader to take time on a consistent
basis to evaluate, plan, and focus. This was why we encourage business owners to
take a strategic retreat every 90 days. By doing this you was step back and look at the
big picture. You was get clear on what results you really want, and then assess how
you’re doing at getting those specific results.

Business growth was largely a function of efficiency and effectiveness.

What are you doing to improve efficiency? What are you doing to improve
effectiveness? As your virtual business coach let me encourage you to take action
today!
Marketing and Sales

The seven attributes focused upon in this section assess the importance banks and life
insurers place on marketing - how to do it, and which institution should be responsible
for it. Questions investigated the effectiveness of sales techniques, sales support and
the types of lead generation activities that work in banks.

Bank-Life Insurer Relationships

This segment covers sales and marketing processes, products, and people. It analyzes
how bancassurance relationships are structured, the methods and channels banks use
to distribute insurance, and the effectiveness and profitability of those methods. By
determining how life insurance products are marketed and sold by banks, and the
profitability of the various methods used, guideposts was be established for starting,
maintaining, and growing a successful bancassurance operation.

Distribution Approaches

Banks and life insurers were asked to rate the effectiveness of specific approaches to
distributing life insurance through banks. Both agree that attribute, development of a
full financial services offering in the bank, including insurance, was essential for a
successful program. Such a fully integrated sales approach, however, was probably
the most difficult one for banks to achieve. It requires an extremely high degree of
point-of-sale integration, a consistent commitment to training, excellent systems for
referrals, incentives, goal-setting, processes and procedures, and last but not least,
excellent technology support. Given both institutions’ current interest in database
integration of insurance, the approach was still worth aspiring to. Additionally, given

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the new legislative and compliance environment, there was a need to differentiate
clearly between fully featured and simplified products at the point of sale.

Selling Factors

Banks and life insurers were asked to rate the importance of ten specific factors in
selling insurance to bank customers, and the level of satisfaction each has with life
insurers’ ability to deliver on these factors. Banks and life insurers in Australia
answered these questions differently than did banks and life insurers in every other
country where this Study has been conducted. Here, banks consistently give either
equal or higher satisfaction scores for the life insurers than the life insurers give
themselves.

Product and Process Design

Affluent customers of Australian banks’ securities and investment units are

considered highly attractive life insurance prospects to both life insurer and bank
respondents. Capturing these markets, though, requires different products from the
commodity platform products as well as more streamlined processes for underwriting
and case management. A number of the following questions delve into bank and life
insurer attitudes about underwriting processes.

Bank-Life Insurer Relationships

This category investigates how important five product attributes are in forming an
optimally functioning relationship between a bank and a life insurer.

This section addresses ten obstacles to effective distribution of life insurance by

banks. Hard issues such as regulatory and administrative barriers and soft issues such
as bank and life insurer attitudes toward the service, their integration into goals and
the importance of incentives to the process, are explored.

Obstacles to Selling Life Insurance to Bank Customers

Both life insurers and banks see several of these elements as significant hurdles to
overcome. The two most significant obstacles are lack of senior management
commitment in the bank and failure to prioritize insurance products in the bank,
ranked by banks and life insurers as the first and second largest impediments to
success, respectively.

In every other country where a bancassurance Study has been conducted to date, the
greatest obstacle life insurers experience to maintaining effectiveness in bank
distribution was lack of senior management commitment. The issue has been a

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consistent one, yielding extremely significant perceptual gaps between banks and life
insurers. In Australia, however, banks as well clearly recognize this issue as an
obstacle to optimizing bancassurance relationships.

Banks and life insurers also agreed on the importance of lack of banking employees’
time, understanding and selling of insurance and lack of time commitment to train
bank staff on insurance as obstacles to optimizing bank sales.

Risk and Profitability

Bank-Life Insurer Relationships

Banks and life insurers were asked to rate the importance of five risk and profitability
attributes in forming an optimal functioning relationship.

Overall, banks Med life insurers gave approximately the same satisfaction scores for
risk and profitability attributes required for a mutually optimal working relationship.
Profitability, however, emerged as an area of real concern for life insurers.

Table 1.3: Claim Analysis

Category 2006 2007 2008 2009 2010 2011 2012 2013 2014
No. Lives 56411 62532 69324 72489 74754 79529 58864 36700 34500
Premium 69.09 76.58 84.9 88.77 93.85 116.43 96.4 95.42 81.57
(?Lacs)
Premium 122.47 122.47 122.47 122.47 125.55 146.4 163.76 260.00 236.00
per life
(Rs)
No. of 20 20 20 20 30 35 35 38 34
Hospitals
Claims 320 324 410 483 527 452 565 367 354
Value of 29.95 68.92 90.84 97.65 112.62 186.28 134.95 78.17 69.15
claims
(Rs Lacs)
Avg. 8414 21273 22157 20 21370 23183 23900 21300 19533
claim
cost (Rs)
Claim 43 90 107 110 122 160 140 81.9 117
Ratio (%)

For targeting the market, it was essential to do analysis of bancassurance players such
as Banks, Employees and Customers. Regulatory norms set up by RBI and IRDA

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also proved to be an obstacle in development of bancassurance in India. Some of
these had recently been cleared with the passage of the Insurance (Amendment) Act,
2002. The Indian banking sector had a long way to go when its success through the
bancassurance business was compared to that of the western countries.

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COMPANY
PROFILE

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 Standard Chartered PLC is a British multinational banking and financial services
company headquartered in London, England. It operates a network of more than 1,200
branches and outlets (including subsidiaries, associates and joint ventures) across more
than 70 countries and employs around 87,000 people. It is a universal bank with
operations in consumer, corporate and institutional banking, and treasury services.
Despite its UK base, it does not conduct retail banking in the UK, and around 90% of its
profits come from Asia, Africa and the Middle East. Standard Chartered has a primary
listing on the London Stock Exchange and is a constituent of the FTSE 100 Index. It had
a market capitalization of approximately £24.4 billion as of 4 April 2017, the 28th-largest
of any company with a primary listing on the London Stock Exchange. It has secondary
listings on the Hong Kong Stock Exchange and the National Stock Exchange of India.
Its largest shareholder is the Government of Singapore owned Temasek Holdings. Bill
Winters is the current chief executive of Standard Chartered. José Viñals is the current
chairman. Standard Chartered has over 86,000 employees globally and has operations in
70 markets. The bank is divided into two divisions, plus Global Business Services: The
Consumer Bank and the Wholesale Bank the consumer bank is retail focused, and
focuses on individuals, small business and high-net-worth clients in the private bank. For
retail customers, the unit manages savings, allows customers to make transactions,
provides wealth management services, and provides mortgages and auto finance. For
SMEs, the consumer bank manages cash, collections, and payments as well as offering
loans 28 the wholesale bank's clients are global corporations, financial institutions and
commodity traders and agribusinesses. Transaction banking helps clients manage their
treasury function through cash management, trade finance and custody services.
Financial markets allow clients to raise capital, manage their risks and invest. The
corporate finance function offers advisory services for mergers and acquisitions and
other restructuring activities. Finally, principal finance makes equity investments to
encourage the growth of businesses.

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Standard Chartered Breeze is a mobile banking application for the iPhone & iPad that
can also be used on the computer. It is largely similar to the online banking services
offered by other banks, with the exception of its function to issue electronic bank
cheques. Launched in the summer of 23 2010 and aggressively marketed, the reviews
have been generally positive. In addition, it has attracted an uncommon amount of
attention due to many innovative marketing strategies it used to promote its product,
mostly focusing on social media. Standard Chartered Breeze organized a blogger's meet
for bloggers to preview Breeze, and its Twitter campaign to give away a free iPad was
extremely successful.

On the 23 March 2016, Standard Charted Bank announced the opening of 'The
eXellerator', the bank’s innovation laboratory, located in Singapore. 'The eXellerator'
builds upon Standard Chartered’s established technology outpost in Silicon Valley, SC
Studios, and is the first such dedicated and strategic space for the bank in Asia. 'The
eXellerator' in Singapore works closely with the business units within the bank and
explores the use of emerging technologies and data science for sustainable business
solutions. The lab is located at the heart of Singapore's financial district in the bank's
main office building at Marina Bay Financial Centre.

Standard Chartered's primary engagement with the fintech community is focused in

Hong Kong, working closely with and coordinated by 'The eXellerator'. The Super
Charger FinTech Accelerator, along with main partners, Standard Chartered Bank (a
founding member) and Fidelity International, has twice conducted programs enabling
international growth-stage companies to expand their operations within Asia. Standard
Chartered Bank has initiated proof of concept projects with two companies: Bambu and
KYC Chain.

We've been in India for over 150 years

Standard Chartered Bank is India’s largest international bank with 100 branches in 43
cities, and we have been operating here since 1858. Key clients segments include
Corporate & Institutional Banking, Commercial & Private Banking as well as Retail
Banking.

Standard Chartered also has the following subsidiaries operating in India: Standard
Chartered Securities (India) Ltd; Standard Chartered Private Equity Advisory (India)
Private Limited; Standard Chartered Investments and Loans (India) Limited; Standard
Chartered Finance limited and Standard Chartered Global Business Services Pvt. Ltd.

Personal Banking

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Wherever you are in your life, enjoy a better banking experience with our comprehensive
Personal Banking solutions, designed to help you save, spend and get rewarded for your
relationship with us. From savings accounts to your first home mortgage or child’s
education fund, we offer a full range of services to meet your evolving financial needs.
Simpler, smarter
banking.

Priority Banking

As your wealth grows, so do your needs and aspirations. Whether you are looking to
invest, protect your wealth, make cash transactions, or buy or sell property, our holistic
wealth management services have it covered. As a Priority Banking client, you get a
dedicated relationship manager, supported by our 24-hour Priority Contact Centre. We
recognize your status globally, so you can draw on our pool of experts, network and
strong capabilities across our markets. You can count on us for your global banking
needs, because your priorities are ours too

Private Banking

High net worth individuals have their own path to success, and unique wealth
management needs. As you build your business and your aspirations become reality,
we’re here to help you leave a lasting legacy. Our team of advisors and specialists across
Asia, Africa, the Middle East and Europe can connect you to opportunities which will
help protect and grow your wealth, laying the foundation for a long-term partnership.

PRODUCTS

Wealth management
Get advice on how to plan for the future and realise your dreams. In today’s complex
investment landscape, you need insights that will help you respond quickly to market
events and make informed investment decisions. With your needs and risk tolerance front
of mind, we offer access to wealth management solutions from leading industry
providers, guided by our investment insights and product specialists.

Current and savings accounts

Our wide range of deposit products are designed to suit your lifestyle, with competitive
interest rates and the option to save in local or foreign currencies. And of course, you

44 | P a g e
can easily access your money when you’re abroad, or anywhere on the move, with our
latest online and mobile banking platforms.

Credit cards

Our credit cards are designed to suit your every need - whether you like
reward points, miles or cash-back we have a card just for you. Widely
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Stay in control of your finances and make the most of life's opportunities and
experiences with our loans and mortgages– whether you’re supporting your
child through college, planning the holiday of a lifetime or buying a home.
Whatever your next move, we’ll help find the right solution for you.

TOP COMPETITORS

Citigroup is the top competitor of Standard Chartered. Citigroup was founded in 1812,
and its headquarters is in New York, New York. Citigroup is in the Banks field. Citigroup
has 123,000 more employees than Standard Chartered.

HSBC is seen as one of Standard Chartered's top competitors. HSBC was founded in
London, England} in 1865. HSBC operates in the Banks industry. Compared to Standard
Chartered, HSBC generates $45.2B more revenue.

UBS is Standard Chartered's #3 rival. UBS's headquarters is in Zurich, Zurich, and was
founded in 1862. UBS is in the Banks industry. UBS generates 43% of Standard
Chartered's revenue.

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RESEARCH
METHODOLOGY

Problem Statement

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India has a huge population and in so as to connec t with such a colossal
customer base, insurance agencies can benefit as much as possible from the
bank's huge system. This offered ascend to bancassurance. Bancassurance is
a procedure whereby insurance products are sold to the clients at their local
bank branch. This relationship is persuading yet exceptionally difficult.

Today the customer is the lord of the market and to fulfill his needs and needs
the business needs to embrace numerous techniques. The cust omers need
everything under one roof, by thinking about this point the k eeping money
industry concocted BANCASSURANCE.

The most common problems to success of banca ssurance are lack of updates
on product knowledge, product training and product awareness, lesser
involvement by the bank staff in promoting bancassurance; corporate clients
give wrong information to sale their products, absence of new product and
better technology, negative attitudes toward insurance and intensive
marketing strategy. Even insurers and banks t hat seem perfectly suited for a
bancassurance partnership can run into problems during implementation. But
the most important problem lies under the s atisfaction level of the customers
and this could only be possible when the bank employees come to about their
choice, likes or dislikes. The present study focuses on the satisfaction level
of customers who are the back bone of bancassurance business in the banking
industry based on certain variables such as customer benefits, convenience,
customers trust etc.

The Indian banking sector has a far to go when its prosperity through the
bancassurance business is contrasted with that of the west ern nations. The
performance of banks in bancassurance services also affects the customers’
satisfaction level. So, the present study is analyzing the performance of
bancassurance services, problems faced by customers from bancassurance
services in private and public secto rs banks and suggesting the ways to
increase the satisfaction level of customer by the way of collecting responses
from customers.

Scope of the Study

The present study has been made attempt to analyze the performance of
bancassurance and compare the level of customers’ satisfaction from
bancassurance services. It also undertakes problems faced by customers from
bancassurance services.

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Objectives of the Study

The aim of the work described in this t hesis is to analyze services by public
and private sector banks by various parameters of perform ance, customer
satisfaction and problem. This study is a modest attempt to give some
suggestions to improve the bancassurance services. To be more specific, the
present study focused on achieving the following objectives. The study
objectives include:

 To analyze the performance of bancassurance services.

 To compare the level of satisfaction of the customers from
bancassurance.
 To study the problems faced by the customers from bancass urance.
 To give suggestions for improvement of the customers’ satisfaction
level from bancassurance.

Data Collection Method

Both primary and secondary method is used to collect the required data.

Primary data: are gathered for specific research report, consist of original
information for fulfillment of project objective. For the study primary data
is collected through survey method by using Questionnaire. The
Questionnaire consists of closed ended questions.

Secondary Data: are already available with some companies or agencies and
the investigators. This data cannot be collected but obtained from the
published and unpublished sources. The investigator consult the secondary
sources like journals, annual reports, magazines, books, and unpublished
material from library, internet and the a rea office.

Sampling design

For the selection of the target group out of the population it is important to
describe the deciding elements that determine the profile of the selected
target group. The determining factors that were, taken into consideratio n
when the sample was selected is known as the sampling frame. Which was of
50 respondents from Delhi/NCR.

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 ANALYSIS
AND
INTERPRETATION

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