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Bancassurance
Bancassurance
Bancassurance
BANCASSURANCE
Bancassurance in its simplest form is the distribution of the insurance
products through the banks distribution channels. In concrete terms
bancassurance, which is also known as Allfinanz describes a package of
financial services that can fulfill both banking and the insurance needs at the
same time it takes various forms in various climate of the countries depending
upon the demography and economic and legislative climate of the country.
Demographic profile of the country decides the kind of products bancassurance
will be dealing with, economic situation will determine the trend in terms of
turnover, market share etc.
Whereas legislative climate will decide the
periphery within which the bancassurance will operate.
The motives behind bancassurance also very for banks ; it is a means of
product diversification and a source of additional fee income. Insurance
companies see bancassurance as a tool for increasing their market penetration
and the premium turnover. The customer sees bancassurance as a bonanza in
terms of reduced price, high quality product and delivery at doorstep. Actually
everyone is a winner here.
Established on the strong foundation of trust and security bancassurance
is a mutual relationship between the banks and insurers. A relationship which is
amazingly complements each others SWOTs.
A very common and highly accepted phenomenon internationally (with a
special mention of Europe) has accepted the Indian Economy for better.
Whether its 4 year old private players or 47 year big LIC all are advocating
bancassurance although slowly and steadily.
Bancassurance is actually the buzzword in insurance industry, today. The
industry is booming and reaching their all time high. According to the experts
the industry is here to stay. With awareness and information being the key got
the success and the distribution becomes the backbone of the system. Also
banking industry is going global and elevating their status from mere banks to
ht ultimate financial institutions. The combination of the two results in win- win
situation for both banks and the insurers. Infarct we can say its a win win
win situation with the customer being the third and the ultimate winner.
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BENEFITS TO INSURERS
Insurers have much to gain from marketing through banks. Personal-lines
carriers have found it difficult to grow using traditional agency systems because
price competition his driven down margins and increased the compensation
decade, life agents have sold fewer and larger policies to a more upscale client
base. Middle-in come consumers, who comprise the bulk of bank customers, get
little attention from most life agents. By capitalizing on bank relationships,
insurers will recapture much of this under served market.
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The new millennium has thought with it two of the largest acquisitions in
the history of the bank with the purchase of Grind Lay Bank from the ANZ
Group and the acquisition of the Chase Consumer Banking operations in Hong
Kong in 2000.
MISSION
Standard Chartered PLC is listed on both the London Stock Exchange
and the Stock Exchange of Hong Kong and is in the top 25 FTSE-100
Companies, by market capitalization. It serves both consumer and wholesale
banking countries. Consumer banking provides credits cards, personal loans,
mortgages, deposit taking and wealth management services to individuals and
small to medium sized enterprises. Wholesale Banking provides corporate and
institutional clients with services in trade finance, cash management, leading,
securities services, foreign exchange, debt capital market and corporate finance
Standard Chartered is well established in growth markets and aims to be the
right partner for its customers. The banks combine deep local knowledge with
global capability.
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ABOUT ALLIANZ AG
Allinaz AG, the worlds No 1 insurer with a gross written premium of
US$63.7 billion [approximately Rs. 300,000] in a fiscal year.
With over 700 subsidiaries and approximately 181,635 employees
worldwide
Allianz global network extents to over 70 countries Europe,
South and Northern Americas, Africa, Middle East, Asia Pacific
Assets under management 1275 billion USD[ Rs. 60 lac crs]
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and / or survival depending upon the condition of the plan. In case of a joint life
plan, the sum assured can be paid on the first death or second death or on both.
The group policy is based on a different basis. Here a group of people,
normally belonging to one employer, or one occupation are insurance together.
All the person on duty on the date of insurance are covered for a minimum sum
insure, called free cover. Nobody has to undergo any medical examination nor is
any proposal form to be filled in by the individual member. The employer of
any other nodal agency fills up the proposal form, which contains the name and
age of each person covered by this master policy
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higher dividend. Therefore, the bonus rate in whole life policies is more
compared to endowment policies.
TERM ASSURANCE:
We have already discussed this concept thorough out. It is the cheapest
insurance and nothing is payable on the expiry of the term. There is variation of
this plan, called convertible term insurance. This plan can be taken initially for
short periods say 5 to 7 years and pay premium at a very low rate. Just before
the expiry of the term, this policy can be converted into an endowment plan of
any duration, by payment of an increased premium. No fresh proposal or
medical examination is required.
ENDOWMENT PLANS:
Endowment plans are those where the sum assured is paid either on
maturity or death if earlier. There can be a large verities of endowment plans to
suit different needs. It takes care of both the risks of dying too early and living
too long.
ANNUTIES:
Annuities are called the reserve of life insurance, because annuity starts
when life insurance ends. Annuity is a series of payment by the insurer n the
expiry of the period during which the annuitant pays the consideration money.
There are a lot of verities of annuities, depending upon the method of payment
of consideration money or the method of payment of annuity.
Immediate annuity:
Here the payment of annuity starts immediately after payment of the
purchase price or the consideration money. Normally this purchase price is paid
in lump sum.
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Deferred annuity:
This annuity is paid after the expiry of the selected period. The purchase
pride can be paid in single premium or installment over a period. The date of
payment of annuity can be prefixed. The period, during which no annuity is
paid, is called deferment period.
Policyholder: as the premium is deducted every month from salary they do not
fee the burden of insurance premium and the chances of default are nil.
Insurer: as it receives bulk premium from one place at the least administrative
cost.
Agent: as the chances of lapses are less and his renewal commission is assured.
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BANCASSURANCE AS MARKETING
PERSONAL BUSINESS GOALS
Bank as an agent you are in this business mainly for the following
reasons,
There us unlimited income potential
Your income is related directly to the effort that youre put in.
You are independent and can make your own programme.
It is a creative job and if you enjoy it, you have money with entertainment. It is
a social service and you get the pride that goes with social service.
But all these are good enough reasons, only if, you also earn money.
Earning money is the criterion of your success and you cannot continue with
this work, unless you make a decent living out of it.
Money however cannot be the sole concern. Satisfaction of your customer,
ethical selling, and prestige amount your cliental shall ensure your long-term
development in this field of insurance and therefore long-term income as well.
This needs a continuous planning with a positive attitude to succeed.
Being your own master, you have to set your own goal. Always keep in
mind
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Proper analysis of the needs also includes the analysis of the existing
assets. the existing savings, the life insurance instruments should be all
considered along with the commitments of expenses like children education,
marriage particularly of female child which is quite expensive in the Indian
context and of course the needs of the family in case of death and also in case
of surviving to the old age. Find out if he has a house, free of encumbrances. If
not it has to be considered an important need which must be provided for?
Follow a consultative method. Keep asking the prospect as to what he
would like to accomplish financially, what is his attitude towards the financial
opportunities available to him and how dose he view his present situation
regarding personal assets and liabilities.
Empathy is critical to the discussion. You must understand the clients needs and
values. Your question must appear relevant
OBJECTIONS
Objections, my dear agent, are your raison detre. If prospects would not raise
objection, there would not raise objections, there would be no need to explain,
and if there is no shop to purchase insurance as they do to buy rice or dale.
Insurance is a difficult concept to understand. A lot of misunderstanding
prevails in the market with regard to life insurance. The need is extremely
personal and therefore open discussed with everybody is not possible. Insurance
is a long term commitment. The insured gets nothing expect a piece a promise
to pay in future. The presence of agent is the only time he is face to face with
somebody who represents the insuring company to clear all his doubts. He
should satisfy himself that this man offering him to solve his financial problem
is completely trustworthy worth his weight in gold.
We can categories the objections in the following four groups
(1) NO NEED:
It is more often born of ignorance. He thinks all his savings are good enough.
He has not understood how is insurance different from other modes of savings.
Show him how insurance scores over other forms of saving by eliminating the
need for time which is the essence of all saving programme. Objections can take
the form of i am too old to buy insurance. I have a lot of savings, i am single, i
dont need insurance. I am going to live a long time.
(2) NO TRUST:
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presence so that you can clarify any doubt. Be prepared to discuss with anybody
the prospect has trust in.
(2) NO HURRY:
It is called an immortality complex. Everyday some body dies and some day
every body shall die. But I shall live for a long time. Wonderful! Examples
abound in our daily life when people have died suddenly. Tomorrow can be too
late. Insurance protects what death takes away. It brooks-no delay, no tomorrow.
It must be done today and now. Keep a scrap book to show pictures how death
can be sudden.
(3) NO MONEY:
If people would only wait till they get all money, they would need no
insurance. If he has a genuine problem to pay premium you should have known
at the time of fact finding. Suggest to him an insurance plan which suits to his
pocket, but also adequately meets his need.
(5) CLOSING
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INSURANCE COMPANIES
Birla Sun Life Insurance Co. Ltd.
BANKS
Bank of Rajasthan, Andhra
Bank, Bank of Muskat,
Development Credit Bank,
Duetsche Bank and Catholic
Syrian Bank
Canara Bank, Laxmi Vilas
Bank, American Express
Bank and ABN AMRO
Bank
Union Bank Of India
Karnataka
Bank,
Met Life India Insurance co. Ltd.
Dhanlakshmi Bank and J&K
Bank
SBI Life Insurance co. Ltd.
State Bank of India
Standard Chartered Bank,
Bajaj Allianz Life Insurance co. Ltd. Syndicate
Bank
and
Centurion Bank
National Life Insurance co. Ltd.
City Union Bank
HSBC and United Bank of
Tata AIG Life
India
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300000
250000
200000
standard
Chartered Bank
ICICI Bank
150000
Centurion Bank
100000
50000
0
2002- 2003- 200403
04
05
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STRENGTHS
In a country of 1 Billion people, sky is the limit for personal lines insurance
products. There is a vast untapped potential waiting to be mined particularly for
life insurance products. There are more than 900 Million lives waiting to be
given a life cover (total number of individual life policies sold in 1998-99 was
just 91.73 Million). There are about 200 Million households waiting to be
approached for a householder's insurance policy. Millions of people traveling in
and out of India can be tapped for Overseas Mediclaim and Travel Insurance
policies. After discounting the population below poverty line the middle market
segment is the second largest in the world after China. The insurance companies
worldwide are eyeing on this, why not we preempt this move by doing it
ourselves
Our other strength lies in a huge pool of skilled professionals whether it is banks
or insurance companies who may be easily relocated for any Bancassurance
venture. LIC and GIC both have a good range of personal line products already
lined up, therefore R & D efforts to create new products will be minimal in the
beginning. Additionally, GIC with 4200 operating offices and LIC with 2048
branch offices are almost already omnipresent, which is so essential for the
development of any Bancassurance project
WEAKNESSES
The IT culture is unfortunately missing completely in all of the future
collaborators i.e. banks, GIC & LIC. A late awakening seems to have dawned
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upon but it is a case of too late and too little. Elementary IT requirement like
networking (LAN) is not in place even in the headquarters of these institutions,
when the need today is of Wide Area Network (WAN) and Vast Area Network
(VAN). Internet connection is not available even to the managers of operating
office.
The middle class population that we are eyeing at are today
overburdened, first by inflationary pressures on their pockets and then by the
tax net. Where is the money left to think of insurance? Fortunately, LIC
schemes get IT exemptions but personal line products from GIC (mediclaim
already has this benefit) like householder, travel, etc. also need to be given tax
exemption to further the cause of insurance and to increase domestic revenue
for the country.
Another drawback is the inflexibility of the products i.e. it can not be
tailor made to the requirements of the customer. For a Bancassurance venture to
succeed it is extremely essential to have in-built flexibility so as to make the
product attractive to the customer
OPPORTUNITIES
Banks' database is enormous even though the goodwill may not be the
same as in case of their European counterparts. This database has to be
dissected variously and various homogeneous groups are to be churned out in
order to position the Bancassurance products. With a good IT infrastructure, this
can really do wonders.
Other developing economies like Malaysia, Thailand and Singapore have
already taken a leap in this direction and they are not doing badly. There is
already an atmosphere created in the country for liberalization and there appears
to be a political consensus also on the subject. Therefore, RBI or IRA should
have no hesitation in allowing the marriage of the two to take place. This can
take the form of merger or acquisition or setting up a joint venture or creating a
subsidiary by either party or just the working collaboration between banks and
insurance companies
THREATS
Success of a Bancassurance venture requires change in approach,
thinking and work culture on the part of everybody involved. Our work force at
every level are so well entrenched in their classical way of working that there is
a definite threat of resistance to any change that Bancassurance may set in. Any
relocation to a new company or subsidiary or change from one work to a
different kind of work will be resented with vehemence.
Another possible threat may come from non-response from the target
customers. This happened in USA in 1980s after the enactment of Garn - St
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Germaine Act. A rush of joint ventures took place between banks and insurance
companies and all these failed due to the non-response from the target
customers. US banks have now again (since late 1990s) turned their attention to
insurance mainly life insurance.
The investors in the capital may turn their face off in case the rate of return on
capital falls short of the existing rate of return on capital. Since banks and
insurance companies have major portion of their income coming from the
investments, the return from Bancassurance must at least match those returns.
Also if the unholy alliances are allowed to take place there will be fierce
competition in the market resulting in lower prices and the Bancassurance
venture may never break-even.
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BIBILIOGRAPHY
MAGAZINES:
Insurance World - June 31
WEBSITES
www.standardchartered.com
www.bajajlallianz.com
www.bimaonline.com
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