Comparison Of Insurance And Bancassurance

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TABLE OF CONTENTS

SL. No.CONTENTSPAGE NO.
1.Executive Summary3
2.Bancassurance = Insurer’s Product + Bank’s reach:4
3.Bank and Insurance: Synergy4
4.Business Model6
5Banks – The focal point7
6.Bancassurance – global perspective7
7.SWOT Analysis9
8.Emerging Trends9
9. The Challenges10
10.Future outlook and Recommendations11
11.References13
12.Exhibits
a.Comparison of fees based income to total incomes for banks14
b.New business insurance sold by various intermediaries (India)14
c.Market Share per distribution network across countries15
d.Insurance policies sold via bancassurance in India15

Executive Summary
Standard Chartered Bank Forms Bancassurance Alliance with Eagle Insurance (09/26/2006). Bajaj Allianz Life Insurance has entered into bancassurance alliances with five co-operative banks including Manjeri Cooperative Urban Bank Ltd (Kerala) and Hubli Urban Cooperative Bank Ltd (Hubli). Aviva has a tied-up with ABN Amro to distribute its product globally (2004). Dena Bank and Om Kotak Mahindra Life Insurance Company (OMKM) have announced a strategic alliance for bancassurance for Indian consumers (February, 2003).

These news are just few samples that kept on hitting the headlines one after the other in past few years. With the beginning of 21st Century, a new revolution in distribution of insurance products emerged. The synergies between the banking and insurance industry suddenly came to limelight and picked up like a wild-fire in a very short span. Equally interesting is the fact that the concept got appreciated across all the countries; developed and developing countries alike.

Bancassurance, the provision of insurance services by banks, is an established and growing channel for insurance distribution, though its penetration varies across different markets. Europe has the highest bancassurance penetration rate. In contrast, penetration is lower in North America, partly reflecting regulatory restrictions. In Asia, however, bancassurance is gaining in popularity, particularly in China, where restrictions have been eased. The research shows that social and cultural factors, as well as regulatory considerations and product complexity, play a significant role in determining how successful bancassurance is in a particular market. Despite having a relatively short history in India, bancassurance is already a major focus for many companies and with a significant market share that is growing exponentially. Watson Wyatt estimates that the current industry average of non-agency distribution of life insurance in India is over 25 per cent and growing.

This paper would study and address the issues related to bancassurance, particularly in India. Strategic considerations at macro economic level on future outlook have also been discussed along with suggestions and recommendations to sustain the growth that it has witnesses till now.

1.Bancassurance = Insurer’s Product + Bank’s reach:
To put in simple words, bancassurance is the provision of insurance banking products and services through the distribution channel of a bank or to a common client base. The usage of the word started picking up when the financial markets witnessed mergers and alliances between the two booming segments – banking and insurance. According to a recent sigma study, bancassurance is on the rise, particularly in emerging markets. Worldwide, insurers have been successfully leveraging bancassurance to gain a foothold in markets with low insurance penetration and a limited variety of distribution channels. Banks world over have realized that offering value-added services such as insurance, helps to meet client expectations. •Competition in the Personal Financial Services area is getting `hot’ in India. •Banks seek to retain customer loyalty by offering them a vastly expanded and more sophisticated range of products.

Customers also want a “one-stop shop” for all their financial needs....
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