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Banking on Bancassurance
Though much ado was made about bancassurance, an alternate
channel to hawk risk products through banks, the channel is
yet to pick up pace as of today. Most of the insurance companies
have already tied up with banks to explore the potential of
the channel that has been a success story in Europe and legislations
are also in place. For insurance companies and banks the convergence
brings about benefits for both but then what’s stopping
it from taking off in a big way?
Bancassurance primarily banks on the relationship the customer
has developed over a period of time with the bank. And pushing
risk products through banks is a cost-effective affair for an
insurance company compared to the agent route, while, for banks,
considering the falling interest rates, fee based income coming
in at a minimum cost is more than welcome.
SBI Life Insurance Company a predominant player in bancassurance
is positive about the channel bringing about a transformation
in the way insurance has been sold so far. The company is banking
heavily on bancasurance and plans to explore the potential of
State Bank of India’s 9000 plus branches spread across
the country and also its 4000 plus associate banks - one of
the reasons why SBI Life Insurance is not laying much emphasis
on increasing its agent force from the present 3000.
The company plans to appoint Certified Insurance Facilitators
(CIFs) in a phased manner at its branches. For now around 320
CIFs, one from each of its bank branches have been identified
for the purpose in addition to setting up insurance counters
at its banking outlets. The number is expected to go up to 500.
‘Out of our present business of around Rs 150-200 crore
bancassurance has brought in 50 percent while corporate agency
and the agent channel have contributed about 10 percent and
40 percent respectively’, says Pradeep Pandey, Head, PR,
SBI Life Insurance Company. The company aims at acquiring 75
percent of the total business through bancassurance and the
balance through the other channels by 2007.
Various models are used by banks for bancassurance. One is
the insurance salesman of the respective company being posted
in the bank, the other is where a select group of wealth management
people of the bank sell insurance and the third is where the
bank employees are incentivised to hawk insurance products.
But the pertinent question is how far will bancassurance succeed
when insurance is a product that is sold not bought in our country.
Insurance needs hard selling but banks have never been aggressive
about selling financial products. Says Pradeep Pandey’
I agree that in our country insurance awareness is low but with
falling interest rates, banks are on the look out for additional
revenue and bancassurance can provide them fee based income
–insurance is one outlet where income can be gained. And
the cost that banks have to incur is minimal. With all the other
infrastructure in place already, the cost is only about training
a few individuals’.
And will products sold through bancassurance be any different?
‘The products sold will be the same. In the first phase
we plan to sell endowment and pension’ opines Mr Pandey,
SBI Life Insurance. On the contrary Shivaji Dam, CEO, OM Kotak
Mahindra Life Insurance begs to differ,’Yes products will
have to be different to be sold through bancassurance. They
will have to be term and savings products with not much of complications.
In other words products that are static and simple’
OM Kotak Mahindra Life Insurance has tied up with Dena Bank
and its own Kotak Bank for bancassurance. The company is targeting
around 10 percent of the business during its start up phase.
Adds Shivaji Dam,’ Our focus will not be the affluent
class but the middle class’ But in case of SBI Life there
is no such emphasis on a segment of the population perhaps considering
the wide reach its bank branches have even in the remotest corners
of the country. Also SBI Life plans to offer its complete basket
of products but OM Kotak will be selling select products.
Insurers are no doubt optimistic about the channel but it does
come with a few limitations. While sale of insurance comes at
a lower cost through this channel in comparison to the agency
route and the insurance company gains much through the large
bank network spread across the country the potential can be
impeded if bank officials do not actively generate leads.
Also it is yet to be seen how far buying shelf space in a bank
helps push sale of insurance. Besides the target audience is
limited to those individuals who visit the bank during the working
hours. And with technology changing at a rapid pace ATMs and
internet banking have been reducing the individual’s visits
to the bank which could perhaps be a dampener for bancassurance.
Insurance companies are positive about the bancassurance channel
raking in volume business at a low cost and banks have been
salivating over the fee-based income that it will bring. But
unless products are simple, easy to understand and easy to market
much of the benefits the bancassurance channel holds, may remain
only on paper.
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