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Bancassurance in India: Issues and Challenges

Chapter · March 2022

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NATIONAL LEVEL & PEER REVIEWED PUBLICATION-CHAPTER IN BOOK-MARCH-2022 -ISSUE NO-01

INDEX
NO. Title of the Paper Authors Name Page No.
1 Impact of Covid-19 on Finance and Banking Transactions Dr. Rupa Z Gupta 1 to 4

2 Impact of Covid-19 M. P. Chikhale 5 to 9

3 Covid 19 and Online Learning Dr. Prashant S. Pagade 10 to 12

4 GIS Concepts and Terrain Analysis Dr. Kailas V. Nikhade 13 to 14

5 ALCOHOLISM AND DRUG ABUSE: STIGMA ON INDIAN SOCIETY Dr. Samurddhi Tapare 15 to 18

6 New Trends in Nutrition Dr. Mrunal R. Waliokar 19 to 22

7 Women Empowerment through Self Help Group in Bhivandi Taluka, Thane 23 to 29

District. Dr. Poonam M. Khadke

8 dksohM&19 vkf.k ekuoh thoukoj >kysys [Link] MkW- rq”kkj e/kqdj ekGh 30 to 34

9 dksfoM&19 ps f’k{[Link] [Link] izk- MkW- ykse’s oj jk- ?kkxjs 35 to 36

10 Òkjrh; y¨d'kkgh iq<hy uohu vkOgkus ,d [Link] voy¨du izk- eukst ds- ljksns 37 to 43

11 कोविड १९ चा शेतकऱ्यािर झाऱेऱा पररणाम सा.प्रा.अनिऱ रविशंकर राऊत 44 to 46

12 dksfoM & 19 pk f'k{[Link] [Link]- M‚- vk'ys"kk eqaxh 47 to 50

13 dksfoM&19 vkWuykbZu f’k{[Link]/nrhpk fd’kksjo;hu fo|kF;kZoj [Link] [Link]% ,d 51 to 55

lekt’kkL=h; v/;;u çk- vferk egkrys ¼fo:Vdj½

14 ’ksrdÚ;kpk xkodqlkrhy fe= & ekuk tekr % l|fLFkrh vkf.k vkOgkus 56 to 60

Prof. Pawan Barhate
15 xzkeh.k ;qokvksa ij mÙkj vk/kqfudrk dk çHkko izk- rqyf’knkl ‘kkejko dksls 61 to 65

16 मीडडया पर कोविड - 19 का प्रभाि [Link] Vaidya 66 to 70

17 ^^ dksjksuk egkekjhps Hkkjrh; vFkZO;oLFksojhy [Link]** izk- vfHkthr euksgj f’kaxkMs 71 to 78

THEME: COVIDE-19 IMPACT ON INDIAN [Link].978-93-82962-14-4

1
NATIONAL LEVEL & PEER REVIEWED PUBLICATION-CHAPTER IN BOOK-MARCH-2022 -ISSUE NO-01

34 xaFz kky;kps vk/kqfud :i ‘kqHke latho eklqjdj 162 to 165

35 dksgk ;k vksiu lkslZ xaFz kky; O;oLFkiu vkKkoyhpk ,d vH;kl 166 to 169
efu”kk eqjyh/kj mbZds

36 egkfo|ky;hu xzFa kky;ke/;s okij.;kr ;[Link]Ú;k D;q vkj dksM cn~ny &,d vH;kl 170 to 174
gseyrk Mqds
37 dksjksukpk f’k{[Link] >kysyk [Link] MkW- lq/kkdj fo- Hkq;kj 175 to 177
MkW- lq/kkdj fo- Hkq;kj

38 dksjksukpk oSokfgd thoukoj >kysyk [Link] MkW- tuknZu dkVdj 178 to 180

39 Kku L=¨r dsæa & fo|kihB xzFa kky;kps vk/kqfud #i eqX/kk euh"k jktudj 181 to 185

40 Kkuxaxks=h =Sekfldkps vk'k; fo'ys"k.k ¼twu 2019 rs es 2021½ 186 to 192

dq-jtuh fot; #[keksMs

41 djksuk egkekjhpsvkfFkZd] lkekftd] [Link] o i;[Link]; [Link] 193 to 200

MkW- fo’kky MCyw- ekysdkj

42 Bancassurance in India: Issues and Challenges 201 to 206

[Link] [Link]

THEME: COVIDE-19 IMPACT ON INDIAN [Link].978-93-82962-14-4

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NATIONAL LEVEL & PEER REVIEWED PUBLICATION-CHAPTER IN BOOK-MARCH-2022 -ISSUE NO-01

Bancassurance in India: Issues and Challenges

[Link] [Link]
Asso. Professor & Head Department of Commerce & Management,
Smt. Radhdevi Goenka College for Women, Akola (M.S.)
Email: abpande12@[Link]
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Abstract:
In the past reforms, the financial sector has more number of players of both domestic and
foreign and the dividing line between the banks and non-banking financial institutions
activities has considerably down. Overlapping in one another‘s functions has become more
common than exception. The Bancassurance Problems and Challenges in India, direct upshot
of these developments led to intensive competition in the banking sector which in turn had a
strong bearing on the banks‘ net interest margin. The financial resources in the hands of
people should be channelized in effective manner so as to increase the returns from the basic
financial structure of nation and also the quality of living of people. Insurance policies are
instruments/products that play major role in upholding the financial structure of developed
countries. Though the teething phase of insurance, one may say is just past, a desirable
foothold is yet to be found. With growth in number of middle class families in the country,
RBI recognized the need of an effective method to make insurance policies reach people of
all economic classes in every corner of the nation. Implementing bancassurance in India is
one such development that took place towards the cause. The need and subsequent
development of bancassurance in India began to improve the channels through which
insurance policies are sold/marketed so as to make them reach the hands of common man as
well as to widen the area of working of banking sector having a network that is spread widely
in every part of the nation and improve the services of insurance by creating a competitive
atmosphere among private insurance companies in the market.

Key words: Insurance, Financial Inclusion, Commerce , Financial resosurces

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Introduction:
The service sector has been witnessing a lot of changes after the emergence of Liberalisation,
Privatisation and Globalisation. Life Insurance Corporation is on the biggest organization,
playing vital role in Indian insurance sector since its establishment. It has been progressing
at a rapid pace since opening up of the Bancassusrance sector in 2000. Bancassurance is
defined as the insurance distribution model where insurance products are sold through bank
branch network. The presence of several banking groups as promoters of insurance
companies is of great significance to this model. With a network of over 80,000 branches,
spread across the length and breadth of the country, banks are having the necessary potential
to make bancassurance the most efficient way to achieve financial inclusion in insurance
sector also. The ease of access to bank customers reduces servicing costs, contributes to
lower lapsation of insurance policies and hence lower costs to the economy. Banks see value

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in insurance business due to complementarity of products, fee income derived from the
distribution of insurance and ease of recovery of advances in case of death of the borrower or
destruction of properties. Several banks being promoters of the insurance companies also
gain when valuation of those companies goes up due to synergies derived from
bancassurance. The growth of Bancassurance was phenomenal in initial years of opening.
The premium collected through Bancassurance has been continuously growing every year.
This premium growth seems to have reached a plateau due to the inability of both banker &
Insurance companies in exploiting full potential of bank customer profile. Not even 10% of
the housing advances are covered either by credit life or mortgage insurance. This is of
concern when we consider the low levels of insurance penetration in the country. Due to
heavy competition among the insurers, they have to incur heavy distribution expenses. Life
insurance companies require immense distribution strength and tremendous manpower to
reach out to such a huge customer base. This distribution will undergo a sea change as
various insurance companies are proposing to bring insurance products into the lives of the
common man by making them available at the most basic financial point, the local bank
branch, through “Bancassurance”.

 Objective of study:
The objectives of this paper are to shed light on the following areas.
1. To understand the Meaning of Bancassurance.
2. To understand the Benefits of Bancassurance.
3. To understand the various Challenges before the Bancassurance
4. To suggest certain Recommendations for the future growth of Bancassurance
 Scope of study:
In this paper the scope of study is limited to Meaning, Need, Benefits of Bancassurance,
Challenges before the Bancassurance & Recommendations for the future growth of
Bancassurance
 Sources of Data:
The paper is based on descriptive arguments, by referring the secondary data like reports,
books, journals, newspapers and online data.
 Meaning & Definition of Bancassurance:
Bancassurance means selling insurance product through banks. Banks and insurance
company come up in a partnership wherein the bank sells the tied insurance company's
insurance products to its clients. ―Bancassurance refers to the insurance product sold at the
bank windows‖.

―Bancassurance is a compound word of French, Banque (bank) and Assurance (insurance)‖.

―Bancassurance means business alliance between banks and insurance Companies‖.

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 Benefits of Bancassurance:
Benefits to the Commercial Banks:

 Additional channel for generation of fee based revenue.

 Better customer retention and stronger relationships.
 Banks have face to face contact with their customers.
 Use of existing infrastructure.
 Proximity to customers & large database.
 Branch achieves profitability targets.
 Benefits to the Insurance Company :
 Ready-made distribution network of bank‘s branches.
 Economy in distribution cost.
 Captures premium of bank financed assets.
 Banks pivotal medium to lift level of insurance penetration in the country.
 Gaining credibility in customer‘s mindset by associating with banks.
 Ease of renewals and lower lapse incidence.
 By cutting cost insurers can serve better to customers in terms of lower premium rate
and better risk coverage through diversification.
 Banks constitute readily available, competent, trusted, educated distribution channel
for the insurer.
 There is a relationship of loyalty and trust between the bank and its customers, which
can become a valuable base for selling insurance.
 Benefits to the Customers:
 It provides economy in the cost of insurance
 The customers may obtain all the integrated financial services under one roof.
 High skilled and trained executives to bring them the benefits of insurance.
 Banks in a better position to meet important set of consumer needs.
 Banks provides an opportunity to make a better informed choice in financial matters.
 Ease of renewals through the mode of standing instructions given to banks.
 It can provide complete financial planning services to its customers under one cost.
 Opportunities for greater customer lifecycle management.
 Challenges & Problems before the Bancassurance:

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The followings are certain challenges & Problems that we have to keep in mind while tie-
up with bank for Bancassurance purpose

 The change from manufacturing to pure distribution of insurance requires banks to

pull together the incentives of different suppliers with their own products in a more improved
way.
 Bank employees are usually low on enthusiasm. Lack of sales culture itself is a big
barrier than the lack of marketing skills in the employees. Banks are generally used to only
product packaged selling and hence selling insurance products logically do not seem to fit in
their system.
 Private sector insurance firms are finding change management as a major challenge.
A public sector bank frequently gets a new chairman almost every two years from different
bank. This results in an absolute change in the distribution strategy and further creates
dissimilarity between public and private sector banks
 The banks also fear that at some point the insurance partner may end up cross‐selling
banking products to their policy holders. If the insurer is selling the products by agents as
well as banks then there is a risk of clash between both if the agents targeting the same
customers
 Training and examinations requirements: Upon the corporate insurance executive
within the corporate agency, this barrier has effectively been removed. Another regulatory
change is published in recent publication of IRDA regulation relating to the licensing of
Corporate Agents
 Specified person to satisfy the training and examination: According to new regulation
of IRDA only the specific persons have to satisfy the training and examination requirement as
insurance agent
 Bancassurance products, being "push" products, require a totally different mindset
and work culture. Whether the existing staff of banks can achieve this is a big question
 Success of bancassurance would also depend on the extent to which and how fast the
technology being used for banking operations can be used for meeting the technology
requirements for insurance business. Otherwise, banks will have to incur large investments
for putting in place the technological infrastructure for bancassurance operations.
 Recommendations:
In order to address the above challenges, a multi-pronged approach with concerted

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involvement of all stakeholders is necessary. The following solutions are recommended for
the future growth of Bancassurance.
 The employees of the Nationalised Commercial Banks must be provided
appropriate training to sell insurance products. They should be competent enough
to respond to any queries of the clients as well.
 The insurance in India need to design insurance products specifically for
distribution through commercial banks. Selling traditional products through
commercial banks in India may not work so effectively.
 Commercial Banks should also make a provision of providing after sales services.
 In order to increase the sale, they should be more rigid in selling the insurance
products.
 Banks should also ensure that the genuine claims are settled within a reasonable
time. It will increase the trust and reliability of the customers on the banks.
 Public sector banks in India are known for their lethargic attitude and for their
poor quality of customer services. In order to succeed in bancassurance business
they will have to ensure prompt and efficient service to their customers.
 There should be a proper system of conflict resolution between the bank‘s
management and the management of the insurance companies.
 The Insurance Companies and Commercial Banks should focus more on
improving the insurance products frequently according to the needs of the banks
customers
 Conclusion:
Today consumer are more aware and actively managing their financial affairs. The
boundaries between various financial products are blurring and people are eagerly looking
not just at the products, but at integrated financial solutions that can offer them stable returns
along with total protection. Insurance products will need to be customized I n order to satisfy
these myriad needs of customers. Consumers prefer those products that offer flexible options,
with benefits unbundled and customizable to suit their varied needs. While sales of traditional
life insurance products like individual, whole life and term will remain popular, sales of new
products like single premium, investment linked, retirement products, variable life and
annuity products are also set to rise. So firms need to constantly innovate new products to
meet ever-changing needs of the consumers. Pricing will also not vary significantly, with
most product premiums hovering around a narrow band. In this competitive scenario, the key

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difference will be the customer experience that each life insurance player can offer in terms
of quality of advice on product choice, along with policy servicing, and settlement of claims.
It is the distributor who makes the difference in customer experience. The Long-term growth
in the business greatly depends on the distribution network, where the emphasis must evolve
from merely selling insurance products to acting as financial advisors, assisting consumers
plan their finances depending on their personal requirements. Shaping of the distribution
channels and the effectiveness of the distribution network in Indian markets will be
influenced by its diverse cultural and social ethos.

 References:
1) Maheshwari Sunil (2005) Insurance Industry in India Structure in India,
The Journal of Insurance of India. Vol. : XXVIII, Jan.-June 2005.
2) Manickavasagam and Pandikumar M.P (2007) ―Swot Analysis of
Bancassurance‖ , The Insurance Times, [Link], No.5, May 2007.
3) Insurance Regulatory and Development Authority, Annual Report, various
volumes, New Delhi
4) Krishnamurthy R (2003) : ‗Blueprint for Success Bringing
bancassurance to India‘ Irda Journal, pp20- 23 December 2003,
IRDA, New Delhi.
5) Malpani Sudarshan (2004) : ‗Many Roads to bancassurance‘ Irda Journal,
August 2004, IRDA, New Delhi.
6) http:/[Link]
7) [Link]
8) [Link]

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