INSURANCE

Name- Mukta Wadhwa Class- S.Y.BMS A Roll No.- 52 Topic- Bancassurance

Acknowledgement:

I am very much glad to Prof. Kanchan for giving us such a knowledgeable project.

It was an immense pleasure to work on this project. In this project I got to know about Bancassurance.

I am also hoping for such good and knowledgeable projects in future also.

Thanking you

INDEX:

Sr. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Contents What is Bancassurance? Origin and Evolution of Bancassurance. Regulations under RBI and IRDA Benefits and Demerits of Bancassurance Models of Bancassurance Benefits to- Banks, Insurers and Customers About SBI Life Insurance Products offered by SBI SWOT analysis of Bancassurance Bibliography

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. There was a time in the past when insurance policies were meant for a small part of public who were financially strong. Today the scenario has completely changed wherein insurance policies reach every person in almost every corner of our nation. This change in the financial horizon was ushered in with the birth of bancassurance in India. Banks which were meant for deposits, loans and transactions are allowed to provide insurance policies to people and this feature of bank is called bancassurance.

How did bancassurance come about?

Before the 1970s, insurance policies were traditionally distributed by insurance agents and brokers. This traditional method of distribution was solidly entrenched in the UK, Germany and Switzerland. Bancassurance proper first appeared in the 1970s in France, when banks were granted permission to market insurance products. The mutual banks - beginning with Crdit Mutuel, followed by Crdit Agricole - were the first to enter the market, and were followed very quickly by Compagnie Bancaire (the parent company of Cardif). Life insurance (savings policies) and creditor insurance were the first products to be distributed via bancassurance. Originated in france in 1980s Spread rapidly across Europe Introduced in india in 1999 -opening up of insurance industry -20 new companies

Bancassurance Evolution
Pressures on banking sector -Customer retention in the face if competition -Staff retention and motivation -Universal banking-approach to provide all financial products under one roof; a broader relationship approach -Optimum utilization of infrastructure and resources-maximise revenue Pressures on insurance sector -Channel diversification from traditional direct sale -Access to a high quality customer base -Achieve the geographical reach within minimum time and cost -Ensure higher probability of success in the sales process

Bancassurance- A win-win situation 1. Bank- customer retention, satisfaction of more financial needs under the same roof, revenue diversificatiom, more profitable resourse utilisation, enriched work environment, establish sales orientated customers. 2. Insurance company- revenue and channel diversification,quality customer access, quicker geograpical reach, creation of brand equity,leverage service synergies with bank, establish a low cost acquisation channel

Regulations under RBI and IRDA:The Reserve Bank of India and the insurance development and regulatory authority have a set of guidelines for companies that couple to form bancassurance. Based on the equity a bank should hold in joint venture, the highest allowable value of equity, the type of banks and insurance companies that can couple together and the operation of bancassurance are all the factors that are regulated by RBI and IRDA. The IRDA has very recently drafted guidelines to promote open architecture in bancassurance. Currently a bank has a tie-up with only one life insurer and one non-life insurer. But in the new model the banks necessarily have to have multiple tie-ups. The country is divided into zones and every bank has to choose multiple insurers within the zones. With this the customer will have a wider range of insurance products offered by different insurers. It will also lead to a deeper penetration in the selling of insurance products.

Benefits of Bancassurance:1. It encourages customers of banks to purchase insurance policies and further helps in building better relationship with the bank. 2. The people who are unaware of and/or are not in reach of insurance policies can be benefitted through widely distributed banking networks and better marketing channels of banks. 3. Increase in number of providers means increase in competition and hence people can expect better premium rates and better services from bancassurance as compared to traditional insurance companies.

Demerits of bancassurance:1. Data management of an individual customers identity and contact details may result in the insurance company utilizing the details to market their products, thus compromising on data security. 2. There is a possibility of conflict of interest between the other products of bank and insurance policies (like money back policy). This could confuse the customer regarding where he has to invest. 3. Better approach and services provided by banks to customer is a hope rather than a fact. This is because many banks in India are known for their bad customer service and this fact turns worse when they are responsible to sell insurance products. Work nature to market insurance products require submissive attitude, which is a point that has to be worked on by many banks in India.

Models of Bancassurance 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 bank or elsewhere. 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.

 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 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.

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 everywhere as the banks get commission, the insurance companies get databases of the customers and the customers get the benefits.

Utilities of Bancassurance
For Banks Product Diversification Building close relations with the customers

For Insurance Companies Stiff Competition High cost of agents Rural Penetration Multi channel Distribution Targeting Middle income Customers

Benefits of BANCASSURANCE
To Banks From the banks point of view: (A)By selling the insurance product by their own channel the banker can increase their income. (B) Banks have face-to-face contract with their customers. They can directly ask them to take a policy. And the banks need not to go anywhere for customers. (C) The Bankers have extensive experience in marketing. They can easily attract customers & non-customers because the customer &non-customers also bank on banks. (D) Banks are using different value added services life-E. Banking tele banking, direct mail & so on they can also use all the above-mentioned facility for Bankassurance purpose with customers & non-customers. (E) Productivity of the employees increases. (F) By providing customers with both the services under one roof, they can improve overall customer satisfaction resulting in higher customer retention levels. (G) Increase in return on assets by building fee income through the sale of insurance products. (H) Can leverage on face-to-face contacts and awareness about the financial conditions of customers to sell insurance products. (I) Banks can cross sell insurance products E.g.: Term insurance products with loans.

To Insurers From the Insurer Point of view: (A)The Insurance Company can increase their business through the banking distribution
channels because the banks have so many customers. (B) By cutting cost Insurers can serve better to customers in terms lower premium rate and better risk coverage through product diversification. (C)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. (D)Customer database like customers' financial standing, spending habits, investment and purchase capability can be used to customize products and sell accordingly. (E)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. (F)The insurance companies can also get access to ATMs and other technology being used by the banks. (G)The selling can be structured properly by selling insurance products through banks. (H) The product can be customized as per the needs of the customers.

To Customers From the customers' point of view:

(A)Product innovation and distribution activities are directed towards the satisfaction of needs of the customer. (B) Bancassurance model assists customers in terms of reduction price, diversified product quality in time and at their doorstep service by banks. (C)Comprehensive financial advisory services under one roof. i.e., insurance services along with other financial services such as banking, mutual funds, personal loans etc. (D) Easy access for claims, as banks are a regular visiting place for customers. (E) Innovative and better product ranges and products designed as per the needs of customers. (F)Any new insurance product routed through the bancassurance Channel would be well received by customers. (G)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.

Distribution Channels
Career Agents Special Advisers Salaried Agents Bank Employees / Platform Banking Corporate Agencies and Brokerage Firms Direct Response Internet E-Brokerage Outside Lead Generating Techniques

State bank of India Life Insurance

SBI Life Insurance is a joint venture between the State Bank of India and Cardif SA of France. Joint Venture Between the SBI and BNP PARIBAS ASSURANCE registered with IRDA on 30. O3.2011 SBI Life Insurance is registered with an authorized capital of Rs 1000 crore and a paid up capital of Rs 500crores. SBI owns 74% of the total capital and Card if the remaining 26%.State Bank of India enjoys the largest banking franchise in India. Along with its 7 Associate Banks, SBI Group has the unrivalled strength of over 14,500 branches across the country, arguably the largest in the world. Card if is a wholly owned subsidiary of BNP Paribas, which is the Euro Zones leading Bank. BNP Paribas is one of the oldest foreign banks with a presence in India dating back to 1860. Card if is ranked 2ndworldwide in creditors insurance offering protection to over 35 million policyholders and net income in excess of Euro 1 billion. Cardif has also been a pioneer in the art of selling insurance products through commercial banks in France and in 35 more countries. SBI Life Insurances mission is to emerge as the leading company offering a comprehensive range of Life Insurance and pension products at competitive prices, ensuring high standards of customer service and world class operating efficiency.SBI Life has a unique multi-distribution model encompassing Bancassurance, Agency and Group Corporate. SBI Life extensively leverages the SBI Group as a platform for cross-selling insurance products along with its numerous banking product packages such as housing loans and personal loans. SBIs access to over 100 million accounts across the country provides a vibrant base for insurance penetration across every region and economic strata in the country ensuring true financial inclusion. Agency Channel, comprising of the most productive force of more than 25,000 Insurance Advisors, offers door to door insurance solutions to customers.

Products Offered by SBI

Individual Products
A.Unit Linked products: 1) SBI Life - Horizon II : SBI Life-Horizon II is a unique, non participating Unit Linked Insurance Plan in Indian Insurance Industry, where you need to be a financial market expert. This plan offers the flexibility of Unit Linked Plan along with Automatic Asset Allocation which provides relatively higher returns on your money where as increasing death benefits provide higher security to your family 2) SBI Life - Unit Plus II : This is a non participating individual unit linked product. It provides unmatched flexibility to match the changing requirements. It provides choice of 5 investments funds in a single policy 3) SBI life- unit plus child plan: SBI LIFE understand you better and hence have developed SBI Life - Unit Plus Child Plan to suit you and your needs best. This Plan is meant for parents in the age group of 18-57 having a child between the age group of 0-15 years. 4) SBI Life Unit Plus Elite: In this policy the customer can choose the type of cover, type of fund to be invested in and the term the customer wants to pay premium for. B. Pension Products SBI Life - Horizon II Pension: A unique Unit Linked Pension Plan that will enable the customers to build a kitty good enough to enable them to spend a peaceful and financially sound, retired life. SBI Life - Horizon II Pension is a safe and hassle free way to get high returns. It comes with the unique feature of Automatic Asset Allocation by means of which you truly, dont need to be an expert to grow your money. 1)SBI Life - Unit Plus II Pension: SBI Life understands the basic needs for pension plan and give the customers financial strength to maintain the life style even after the retirement. This is a unit linked pension plan wherein the policyholder chooses an investment period from 5 to 52 years for avesting age between 50 to 70 years. They can choose to pay either single premium or pay regular premium for the entire policy term. Their contributions are invested into 4 fund options as per their choice.

2) SBI Life - Lifelong Pensions: It is a pension plan wherein the policyholder gets the flexibility to meet the post retirement financial needs. It also provides tax benefits. The policyholder also has the option of withdrawing a lump sum amount up to particular limit. 3) SBI Life - Immediate Annuity: SBI Life - Immediate Annuity Plan is introduced for Pension Policyholders. This product provides annuity payments immediately from payment of purchase price. It has been specially designed to cater to the annuity needs of existing policyholders (SBI Life Lifelong Pensions, SBI Life - Horizon II Pension, SBI Life -Unit Plus II Pension) at the vesting age. C . Pure Protection Products 1) SBI Life - Swadhan: This is a Traditional Term Assurance Policy with guaranteed refund of basic premium .Life cover is provided at no cost. Tax benefits also provided. There is also a rebate on high sum assured. There is also flexible benefit premium paying mode. 2) SBI Life - Shield : It offers the customers with the life insurance cover at the lowest cost for a selected term. Tax benefit is also provided. There is also rebate on modes of premium payment. 3) SBI Life Shield as a Keyman Insurance Policy: A Keyman insurance policy is taken to protect the organization against the reduction in profit resulting from the death of theKeyman. As per IRDA circular only Pure Term Assurance Products may be used as a Keyman Insurance. The SBI Life Insurance provides SBI Life Shield as a Keyman Insurance Policy. D.Protection cum Savings Products 1) SBI Life Sudarshan: SBI Life - Sudarshan is an Endowment Policy designed to provide savings and protection to the policyholder and their family. They can save regularly for the future. Thus at the end of the plan, he will receive a substantial amount of savings along with the accumulated bonuses declared. At the same time, his family will be protected for death risk for the full Sum Assured. 2) SBI Life - Scholar II: Twin benefit of saving for the child's education and securing a bright future despite the uncertainties of life. Option to receive the installments in lump sum at the due date of first installment of Survival benefit. E .Money back scheme products 1) SBI Life - Money Back : It is a Traditional Saving Plan with added advantage of life cover and guaranteed cash inflow at regular intervals. The plan has a number of money back options specially suited to the customers needs. The cover is available at competitive premium rates.

2) SBI Life - Sanjeevan Supreme: It is a Traditional Saving Plan which offers a life cover for the term of the customers choice at the same time does not burden him with liability to pay premiums for the entire term and also provides cash flows at regular intervals.

For brokers SBI life- saral ulip Group products Group employee benefit products Retirement solutions SBI life-capassure gratuity scheme SBI life- capassure Superannuation Scheme SBI Life - CapAssure Leave Encashment Scheme SBI Life-group immediate annuity SBI Life-golden annuity SBI Life-dhanrashi SBI Life-swarna jeevan SBI Life- Group Gratuity cum Life Cover Scheme SBI Life-group superannuation scheme SBI Life provides SBI Life - Group Leave Encashment cum SBI Life - SWARNA GANGA

Group Protection Plans

SBI Life - Sampoorn Suraksha SBI Life Super Suraksha SBI Life - Credit Guard Specialized Term Insurance SBI Life - Shield used as Keyman

Group Term with ROP

SBI Life - Swadhan (Group)

Group Loan Protection Products

SBI Life-Dhanaraksha Plus SP SBI Life-Dhanaraksha Plus LLPT SBI Life-Dhanaraksha Plus RP

GROUP SAVINGS PROTECTION

SBI Life NIDHI RAKSHA RP E- GROUP MICROINSURANCE SBI Life GRAMEEN SHAKTI SBI Life GRAMEEN SUPER SURAKSHA

SWOT analysis
Strengths Vast untapped market Huge pool of skilled professionals

Weakness Lack of networking among bank branches Saving ability of middle class

Threats Human resourse challenges, Non-response from the target groups can also pose challenge.

Opportunites Datamining- banks have a huge customer database which has to be properly leveraged. Target sagments should be identified and tapped. Wide distribution networks of banks. Exploit the corporate customers and tie-up for insurance of the employees of corporate clients

Bibliography http://www.bnpparibascardif.com/en/cid3191594/the-historybancassurance-growth-worldwide.html http://www.slideshare.net/ /copy-of-bancassurance-presentation http://www.scribd.com/doc/13453035/project-on-bancassurance http://tips.thinkrupee.com/articles/bancassurance-in-india.php http://www.sbilife.com/sbilife/content/9_2809