Anda di halaman 1dari 31

INTRODUCTION TO INSURANCE

NEED FOR INSURANCE:


From cave age till date, the story of evolution of mankind is in fact a saga
of continuous search for security. His problems have remained the same through
the centuries though the from has changed with the changes in economic and
Social circumstances.

INSURANCE AS A SOCIAL SECURITY TOLL:


Individuals income is dependent upon the investment of his time. Over a
Period of time, he saves sufficiently to provide for the time, when he is too old
to earn. But no body can guarantee him this time. This uncertainty of time
leads him to the invention of insurance. The story goes of a newspaper hawker
boy who used to earn his livelihood. One day, when he left his cycle outside a
house and went in to deliver the newspaper, his cycle got stolen. He had
thereafter no means to run around. Walking would be a slow process and his
Income would dwindle. The boy was a smart one. he called his other brother
hawker and narrated his story. Many others in the same job had similar stories
to tell. They just hit upon an idea. A cycle say would cost rs. 100/-. There were
almost 100 hawkers. Almost every year one cycle was getting stolen. Only if
they could have a fund of rs. 100/-such a loss suffered by any of them could be
compensated. And the creation of a fund of rs.100/- merely means a
contribution of rs.1/- per person per year. The concept of insurance was born. A
co-operative society was created, where each member of the family contributed
a small portion to provide for a possible big loss which was too big for any one
to bear.
We call life insurance a social security tool because without the provision
of insurance, this human society would consist of hapless old people, helpless
widows, and unprotected orphans. The economy would not survive let alone
grow. The factories would not restart after an earthquake or a cycle or a
motorcycle for that matter couldnt be replaced after being stolen. Unlike a
socialist society where the state takes care of individuals who become destitute
or deprived, in a developing society like ours, the State is too poor to take up
such responsibilities.
Insurance is based upon the universal axiom. God helps him, who helps
himself. There are only three sources of income when calamity has befallensaving, charity and insurance. Saving needs time to accumulate. Normally in
case of human beings, 90% of the income comes from his saving and 10% from
investment of his time. That is the ideal situation. But who can guarantee him
the time time to save adequately so as to reverse this ratio. The second
alternative- charity is too demeaning to be even considered as a proper
alternative. The only viable alternative therefore is insurance. It is a product of
1

Bancassurance

individuals farsightedness, his present sacrifice for a future gain. It is


commensurate with his self-respect and dignity.

ADVANTAGE OF LIFE INSURANCE:

Planning for retirement


Planning for childrens education
Child marriage
Medical care & expenses
Tax consideration
Earning interest income
Provision for contingencies
Forced saving
Risk coverage
Tax benefits
Unearned income
Moderate return
Planning for future

LIFE INSURANCE AS A LEGAL CONTRACT:


A Life Insurance Policy is an evidence of contract between the policy
holder and the life insurance company. Under such a certain sum of money
which is payable to the beneficiary in the event of death of the policy holder
within a certain period or to the policy holder if he is alive the end of the period.
The Contract Act governs Life Insurance Contract, like any other ordinary
Contract. For example, there are two parties to the Contract the policy holder
and the insurer. Both parties have right to the obligations. The policy holder has
the right to the claim money as stated above and has the concurrent obligation to
disclose all facts regarding his health, habit and occupation and future to pay the
policy or earlier death. On the other hand, the insurer has the right to know all
the information complete and accurate about the policy holder and to the
premium payable and has the obligation to pay the promised sum on the
happening of the contracted event death or term of the contract during the
currency of the policy and cant withdraw from the obligation to pay the sum
assured, while the policy holder has the right to stop payment of premium at any
time, thereby losing the future benefit under the policy contract. Life Insurance
is, therefore, called unilateral contract. Like any other contract, life insurance
contract is enforceable in a court of law. The terms and conditions of the
contract are mention in the policy, which must be read carefully. The essential
elements of contract are:
The parties to the contract should be major
There should be an offer and acceptance
2

Bancassurance

Consideration should be paid for a reciprocal benefit.


Parties to the contract must be of one mind.
It is well known that the proposer of life insurance has to enter into a valid
legal contract. However where the insured person is a child, his father or mother
can propose for the insurance of the child, as the parents are accepted as legal
guardians and authorized to enter into legal contract on behalf of their ward.
The proposal from constitute an offer letter by the proposer, wherein the
proposer is expected to answer all question truthfully and should not withhold
any information regarding his health, habit and occupation. Under normal
contract of purchase of sale of commodities, land etc, the buyer has the quality
of the object that he is buying, Buyer beware or caveat emptor is the
principle, because the buyer has no right to come at a late date and ask for the
termination of the contract on the ground of deficiency in quality of quantity. It
is true that in the present age, when the commodities like TV, Refrigerator of
Computer are highly technical in nature and it is not possible for a layman to
examine all aspects immediately, the vendor gives a warranty of year or six
moths during which period, if the object is found defective, it has to be replaced
or money refunded.

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.

WHY SHOULD BANKS ENTER INSURANCE?


There are several reasons why bank should seriously consider
bancassurance, the most important of which is increased return on assets
(ROA). On of the best ways to increase ROA, assuming a constant asset base, is
through fee income. Banks that build fee income can cover more of their
operating expenses, and one way to build fee income is through the sale of
4

Bancassurance

insurance products. Bank that effectively cross-sell financial products can


leverage their distribution and processing capabilities for profitable operating
expense ratio.
By leveraging their strengths and finding ways to overcome their
weakness, bank could change the face of insurance distribution. Sale of personal
line insurance products through banks meets an important set of consumer
needs. Most large retail bank engender a great deal of trust in broad segments of
consumers, which they can leverage in selling them personal line insurance
products. In addition, a banks branch network allows the face to face contact
that is so important in the sale of personal insurance.
Another advantage banks have over traditional insurance distributors is
the lower cost per sales lead made possible by their sizable, loyal customer
base. Banks also enjoy significant brand awareness within their geographic
regions, again providing for lower per-lead cost when advertising through print,
radio and/or television. Banks that make the most of these advantages are able
to penetrate their customer base and markets for above-average market share.
Other banks strengths are their marketing and processing capabilities.

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.

COLLABORATION IS THE KEY:


In their natural and traditional roles and with their current skills, neither
bank nor insurance companies could effectively mount a bancassurance start-up
alone. Collaboration is the key to marketing this new channel work.
Banks bring a variety of capabilities to the table. Most obviously, they own
proprietary databases that can be tapped for middle market warm leads. In
addition, they can leverage their name recognizatition at both local and regional
levels. Strong players also excel at managing multiple distribution channels,
crossing-selling banking products and using direct mail. However, most bank
lack experience in several areas critical to successful bancassurance strategies,
in particular, developing insurance products, selling through face-to-face
push channel underwriting, and managing long tail insurance products.
Where a bank usually fall short, a strong insurer will excel. Most have
substantial product and underwriting experience, strong push channel
capabilities and investment management expertise. On the other hand, they tend
to lack experience of ability in the areas where banks prevail. They have little of
5

Bancassurance

no background in managing low-cost distribution channels; they often lack local


and region name recognition and reputation and they seldom possess access to
or experience with the middle market.

Bancassurance

STANDARED CHARTERED BANK


Standard chartered is the worlds leading emerging market bank
headquartered in London. Its business however, has always been
overwhelmingly international. This is summary of the main events in the
history of Standard Chartered Bank and some of the organization with which it
merged.

THE EARLY YERARS


Standard Chartered is named after two banks which merged in 1969.
They were originally known as the Standard Bank of British South Africa and
the Chartered Bank of India, Australia and China .Of the two banks, the
Chartered Bank is the older having been founded in 1853 following the grant of
Royal Charter from Queen Victoria. Today Standard Chartered is still one of the
three banks which print Hong Kongs notes.

EXPANSION IN AFRICA AND ASIA


The Standard Bank opened for business in Port Elizabeth, South Africa in
1963. it pursued a policy of explosion and soon amalgamated with several other
banks including the Commercial Bank of Port Elizabeth, the Colesberg Bank,
the British Kaffarian Bank and the Fauresmith Bank. The Standard Bank was
prominent in the financing and development of the diamond field of Kimberly
in 1867 and later extended it network further output of the new town of
Johannesburg when gold was discovered there in 1885. Over time, half the
output of the second largest goldfield in the world passed through the expanded
into Mozambique in 1894, Botswana in 1897, Malawi in 1901, Zambia in 1906,
Kenya, Zanzibar and the Democratic Republic of Congo (D.R.C.) in 1911 and
Uganda in 1912. of these new business, Botswana, Zanzibar and D.R.C. proved
the most difficult and the branches soon closed.
In Asia the Chartered Bank expanded opening offices in, Myanmar in
1862, what is now Pakistan and Indonesia in 1863, the Philippines in 1872,
Malaysia in 1857, Japan in 1880 and Thailand in 1894. Some 34 years after the
Chartered bank appointed an agent in Sri Lanka it opened a branch in 1892 to
take advantage of business from the tea and rubber industries. During 1904 a
branch opened in Vietnam. Both the Chartered and the Standard bank opened
offices in New York and Hamburg in the early 1900s. the Chartered Bank
gaining the first branch license to be issued to a foreign bank in New York.

STANDARD CHARTED TODAY:


Today standard Chartered is the worlds leading emerging markets bank
employing 30,000 people in over offices in more then 50 Countries primarily in
countries in the Asia Pacific Region, South Asia, the Middle East, Africa and the
Americas.
7

Bancassurance

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.

Bancassurance

OUR INSURER BAJAJ ALLIANZ


The Standard Chartered group has ties up with Bajaj Allianz Life
Insurance Company to offer our customers the best solution for their insurance
needs.

WHY BAJAJ ALLIANZ


Bajaj Allianz s a union between Allianz AG of Germany, the Worlds
leading insurer, and Bajaj Auto, one of Indias most respected names

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]

ABOUT BAJAJ AUTO


In the auto market for the last 55 years
A Rs. 4,000 core auto giant
Employs over 15,000 employees
The Largest manufacturer of two-wheeler and three-wheeler in India and
one of the largest in the world
A company with strong brand image and brand loyalty, synonymous with
quality and customer focus

HOW WILL ALLIANZ BAJAJ WILL CARTER CUSTOMERS.


Bajaj Allianz has placed its Insurance Services Consultants- specialists in
Insurance in our branches These specialists are hand picked by Bajaj Allianz
and extensively trained to understand needs Customer needs will be analyzed
and only then will they be advised of the right protection plan for them and their
family The specialist is salaried employee of Allianz Bajaj; the size of premium
does not guide his/her advice. He / she will be the customers one point of
contact. All after sales service requirements will be taken care of the branch
itself by the specialists The Insurance Service Consultants will very soon be
able to offer policies online.

Bancassurance

HOW WOULD ALLIANZ BAJAJ TAKE OF OUR CUSTOMERS


NEED?
We follow a need-based approach to insurance we run you through insurance
needs Planner and assess. Your insurance needs based on parameters such as:
Household expenses Outstanding loans Childrens Education needs
Other future expenses like childrens marriage Assets & Resources
Spouses contribution to family income
Once we know the level of insurance you would require to take care of your
family, we would then select the product you that would be most suitable for
your needs.

10

Bancassurance

THE PLANS OFFERED BY THE PLAYERS IN THE


INDUSTRY
THE TRADITIONAL PLAN:
We have discussed in the previous chapter the basic nature of life
insurance. We have talked of pure insurance where nothing is payable to the life
assured who survived the duration of policy. We have talked of savings
elements. We can think of a life insurance policy when the sum assured is paid
on survival only and nothing payable on death. But this is no insurance. It is like
a bank deposit and therefore, by itself cannot be considered a life insurance
plan. Life insurance Corporation had a similar plan, which was late on
withdrawn. However, the savings factor can be added to the pure insurance to
form infinite varieties of plan to meet different needs.
The pure insurance is called tern insurance. It can be for any length of
period. When its duration is whole life, it is called a whole life policy. Premium
is payable through out life and the death claim. I.e. sum assured. Most
companies pay the claim when the life assured attains age 100. It is a matter of
grace, homage to the survivor. Payment of premium is also not insisted upon till
death. It is normally waived after the premium has been paid say of 35 year or
age 80 whichever is later. An endowment plant is a combination of a term
assurance plan and a pure saving plan. The premium amount is enhanced to
provide for the return of the sum assured, it the life assured survives the period.

UNIT LINKED PLANS


These plans normally hold the premium divided into two categories that
which is meant to cover the life risk and the other which is invested in units in
the market to earn dividend. As we have said earlier, normal life insurance
plants though so charge for both life insurance and savings which is invested. It
is not accounted for separately in their books nor is the policy holder informed
about this division. Unit Trust of India is a mutual fund company and had
floated the unit-linked plan in collaboration with LIC. LIC has therefore,
clamped certain restrictions on the UTI so that UTI does not become an
effective competitor. UTIs ULIP plan cannot be for duration longer than 15
years nor can it be for an amount more than 75,000/-.

INDIVIDUAL AND GROUP POLICIES:


An individual policy of personal policy is on the life of a single or at best
two lives. Each life to be assured is separately considered, for taking life risk.
Each one fills up a separate proposal. Medical examination, if necessary is
done. Premium is decided on the basis of age. Sum assured is paid on the death
11

Bancassurance

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

WITH PROFIT AND WITHOUR PROFIT POLOCIES:


The profit requirement in an insurance policy is a modern concept in
order to make life insurance more attractive. Only if the sum assured as it is to
be returned after years of paying the premium, the life assured feels cheated. He
therefore, wants that his premium amount should also earn some profit and the
final sum assured should be much more.
The insurance companies charge an extra amount from the policy holder
for allowing such benefit. This is called bonus loading, which can be quite
substantial. Thus without profit policies are much cheaper compared to with
profit policies. The bonus can be paid along with the claim only, thought it is
declared every year. It is, then called reversionary bonus. Some insurance
companies may decide to pay bonus in cash every year. In such a case, the
amount payable has to be necessarily much less than in case of a reversionary
bonus.
Longer the term, higher is the bonus earned. LIC had divided its bonus
rate on the basis of the length of the term of plan. Policies with a term of 26
years or more earn bonus at a higher rates than the policies of term between 21
years and 26 years. The policies of less than 21 years earn at a still lower rate.

WHOLE LIFE POLICY:


Whole life policies are normally those where the claim is paid on death or
at age 100 by grace. It can be a with profit policy or a without profit policy. The
premium paying period can be for the entire period or limited to lesser number
of years. It is called a limited whole life plan. In fact the premium paying period
can be anything from 5 years to 50 years or even longer. For the same sum
assured and at the same age, the longer the duration of premium paying period,
the smaller is the quantum of premium. The final claim can be paid in single
installment or as a pension payable in several installments.
Since in the whole life polices, the claim is payable on death only, the
insurance companies can invest this money in long-term project and thus earn
12

Bancassurance

higher dividend. Therefore, the bonus rate in whole life policies is more
compared to endowment policies.

INTEREST SENTIVE PLANS:


The permanent plans like whole life, endowment or money back plans, hitherto
marketed are called traditional plans. In spite of the wide popularity of these
traditional plans, these plans have certain inherent weaknesses. It lacks
transparency, because the saving element is no seen to be growing during the
policy duration until it matures.
Theses plans lack liquidity, because the amount of surrender value,
compared to the paid up value is very small. The policyholder suffers a great
loss if he wants to get out of the traditional plan in the midway.
These plans lack flexibility because the policy holder has to pay the fixed
premium, through out the duration of the policy lest he loses the cover
The policyholder has no control over the investment of saving amount.

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.
13

Bancassurance

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.

POLICIES FOR FEMALES, CHILDREN AND PHYSICALLY


HANDICAPPED:
The females hitherto were considered a separate group form males for
insurance purpose for several reasons, some of which are not valid today.
Females are considered weaker sex because they can be killed easily to
take benefit from insurance. Examples of such deaths are many. Dowry deaths,
widow killing are social scourges, with which we lived for quite long. Such
crimes are rampant in certain communities only. This special risk to the women
is called in insurance parlance moral hazard.
Children are considered a special category because child mortality is higher
than adult mortality. How ever, with the medical advancement even this risk
difference is also first disappearing. Female child mortality is particularly high
in certain areas and therefore, underwriters are careful in accepting risk on such
lives. Normally a waiting period of say two years is insisted upon after
insurance before the life risk is accepted on a childs life.
Physically handicapped need support as they cannot earn themselves.
Government allows a lot of tax benefit to the parents is encouraged to make
provision for their handicapped children, in case of the parents death.

SALARY SAVINGS SCHEME (SSS) POLICIES:


The salary saving scheme plans has been designed for the working class.
Under the scheme the employer deducts the premium under the policy from the
salary of the employee every month and deposits the same to the insurer. This
scheme is beneficial to:

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.

14

Bancassurance

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

Why am I here? (Your mission)


Where am I going? (Your goal)
How am I doing? (Feedback)
What will I get? (Rewards)
Where do I go, when I need help?

MARKETING AND SELLING:


Activity is the basis of your business. Sales results directly from the
amount and quantity of your activities in your business. And your business is
marketing and not selling. Marketing is the process of identifying peoples
needs, clarifying those needs and creating and supplying the products and
service appropriate to satisfying those needs. It is activity that focuses on the
needs of the buyer. Selling on the other hand us exchanging the product for the
buyers cash. It is the sellers initiative and it is the sellers need to exchange his
product. It is seller oriented. Marketing on the other hand is buyer oriented. It is
his ultimate satisfaction that decides the total process of marketing.
However each activity is important for the society but it is necessary to
understand the critical skills that you need to develop and apply to succeed in
insurance marketing.

STEPS IN THE MARKETING:


15

Bancassurance

Knowing the territory and the people and their business.


Identifying the market in which you feel you have a natural access or you
are comfortable with.
Make sure you understand need of the market and that you have products,
which can satisfy those needs.
Having done this macro study of your market, identifying the individuals
whom you would like to approach. Prospecting is efforts, as to what is their
natural market. Now is the time to identify your market and spend time and
energy in developing it. You can experience improved sales ratio and cost
effectiveness in the markets that are carefully selected and are responsive to
your efforts.
This will to a great extend depend upon your past experience, the group with
whom you have lived and worked in the pas. Once you are acquainted will with
a group, you know their particular needs and you can tailor your approach to
satisfy those needs. For example, if you feel doctors are your natural market,
you will know when to meet them, what are their concerns, that they are short
of time, of their place in the society and their income level.
All these help to plan your sales approach.

16

Bancassurance

ROLE OF BANKER AS AN INSURANCE AGENT


SELLING TECHNIQUES:
SALESMANSHIP AN INTRODUCTION
You have taken to this job of insurance salesmanship because :
You have seen in this profession an unlimited income potential.
Your return would be commensurate with your efforts.
You will be an independent person making your own time
schedule.
You would be your own boss, working during hours of your
convenience.
You must have seen it as a creative profession creating want
where it was never seen and going ahead to suggest ways to satisfy
it and,
it is a great social service, providing financial assistance to
widows, orphans and old people
Selling Process:
PRE APPROACH:

Pre-approach means preparing to approach the prospect. But, who is the


prospect? At the beginning of the career, it is advisable that an insurance agent
should star in familiar surroundings, among friends and relatives. Strangely,
many agents do not approach their own relatives, because of a preconceived
bias against insurance. They fell however unconsciously that insurance is not
for their own people, insurance is only for the people, the strangers. Nothing can
be far from truth. Before you approach anybody, approach yourself, be
convinced that insurance is a good thing, in fact so good that without adequate
insurance. How can one sleep at night. Only if the breadwinner would know or
feel what would happen to his family, his loved ones, if he suddenly disappears?
How could one resist a proposal for life insurance! It makes all the difference
between agitated mind and peaceful mind. My dear agent, before you start
approaching anybody for insurance, approach yourself, self yourself the idea of
insurance, honestly and convincingly. Then and then alone you will be a winner
INTERVIEW
Having obtained the necessary data about the prospect, you are ready
with your solutions which can be discussed with the prospect in the interview.
Better cross check these data before you start taking solution. If you are both
before your start taking solutions. If you are both ready for the talk in advance,
the discussion can be held in a professional atmosphere each one knowing the
purpose of meeting and the solutions to be expected.
17

Bancassurance

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:

A no trust objection may relates to you, your product or your company,


it may be stated as i need to discuss with my life, or lawyer or other agents etc.
if it is about yourself, you have to establish your credentials by reference to
other friends or business associates who are your policy holders, your training
and qualification, your performance and standing in the field of insurance. Club
membership is a good trust certificate. Wife or lawyer can be consulted in your
18

Bancassurance

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

As we have discussed in previous paragraphs, any transaction between


two intelligent human being is never a smooth affair. There are always lots of
slips between cup and lips. But that is a part of the game or should we say that
makes such transaction so interesting, even adventurous. Objection can be
raised at each point, even for seeking an interview, getting information or
discussing a plan. But that is how your experience, your presence of mind and
sincerity are tested.
For you, insurance is a matter of daily discussion. For the prospect he
may be discussing it for the first time. He is not sure whether he is taking a wise
decision. Many previous agents may have bluffed him in a past. He wants to
make sure that he is not being bluffed once again. Take time to care. His
questions may appear very foolish to you. But they are important for him. The
proper answer to these questions shall help him to take a decision.

19

Bancassurance

LIST OF THE PLAYERS IN THE BANCASSURANCE


INDUSTRY

INSURANCE COMPANIES
Birla Sun Life Insurance Co. Ltd.

Dabur CGU Life Insurance co. Ltd.


HDFC Standard 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

ICICI Prudential Life Insurance co.


Ltd.

Lord Krishna Bank, ICICI


Bank, Bank of India,
Citibank, Allahabad Bank,
Fedral Bank, South Indian
Bank and Punjab and
Maharashtra Co-operative
Bank

Life Insurance Corporation Of India

Corporation Bank, Indian


Overseas Bank, Centurion
Bank , Satara District
Central Co-operative Bank
Janta Urban Co-operative
Bank, Vijaya Bank, Oriental
Bank of Commerce

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
20

Bancassurance

COMPARATIVE ANALYSIS OF PREMIUMS


COLLECTED BY SOME OF THE PLAYERS OF
BANCASSURANCE INDUSTRY

300000

250000

200000
standard
Chartered Bank
ICICI Bank

150000

Centurion Bank
100000

50000

0
2002- 2003- 200403
04
05

21

Bancassurance

MATURITY PROFLE OF BAJAJ ALLIANZ INSURANCE


COMPANY

22

Bancassurance

ASSET ALLOCATION OF BAJAJ ALLIANZ AS ON JULY


31 2005

23

Bancassurance

RESPONSE OF THE BANCASSURANCE FROM THE


CUSTOMERS
Response to Bancassurance in India from the customers has been very
warm and encouraging as customers have far greater trust and faith in Banks
when it comes to financial products. The concept of financial planners does not
exist in India and traditionally Bank Managers in India have strong relationship
with the customers and also act as their investment advisor, especially in smaller
towns and cities.
This trust has also helped our Bancassurance partners to advise on
various Insurance plans to help secure their future and provide growth to their
savings. The other advantage that Banks have in India is that in India, banking
is still done in the brick and mortar model, which means that most of the
customers still walk into the Bank branches to do their banking transactions.
On an average an insurance advisor in the bank is able to sell insurance
product 5-6 times higher than an insurance agent. This is because of the larger
number of customers available with them as well as the number of walk-in
customers, where the bank staff has the advantage of the trust and credibility of
the trust and credibility of the customers and the bank brand name.

24

Bancassurance

STEPS TO BE TAKEN TO POPULARIZE THE


BANCASSURANCE IN INDIA
Bancassurance is already contributing around 15-18 % of the new
business amongst the private sector life insurance companies and there is
immense potential in this channel.
Bancassurance contributes more than 25% of the new business of the
company. Banks are spending lot of resources in training the Bank staff for
selling insurance products which are different from selling banking products.
Insurance products have to be sold rather than bought. Various training
modules on Lead spotting, Cross selling , Up selling which help in improving
the productivity of the bank staff in sales of insurance products.
Regulations in Bancassurance have also been relaxed in tandem with the
growing interest in alternative channels. High emphasis needs to be laid on
performance appraisal and sales training of bank managers which will help to
actively promote the product.
Also the insurers are now trying to work with the co-operative banks that
have a very loyal customer base. This would help the banks also in improving
their bottom lines, without making any investments for this business and would
be a win-win situation for both the insurance company and for the banks.

25

Bancassurance

BANCASSURANCE IN INDIA - A SWOT ANALYSIS


Even though, banks and insurance companies in India are yet to exchange
their wedding rings, Bancassurance as a means of distribution of insurance
products is already in force in some form or the other. Banks are selling
Personal Accident and Baggage Insurance directly to their Credit Card members
as a value addition to their products. Banks also participate in the distribution of
mortgage linked insurance products like fire, motor or cattle insurance to their
customers. Banks can straightaway leverage their existing capabilities in terms
of database and face to face contact to market insurance products to generate
some income for themselves which hitherto was not thought of.
Once Bancassurance is embraced in India with full force, a lot will be at
stake. Huge capital investment will be required to create infrastructure
particularly in IT and telecommunications, a call center will have to be created,
top professionals of both industries will have to be hired, an R & D cell will
need to be created to generate new ideas and products. It is therefore essential to
have a SWOT analysis done in the context of Bancassurance experiment in
India.

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
26

Bancassurance

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
27

Bancassurance

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.

28

Bancassurance

BIBILIOGRAPHY
MAGAZINES:
Insurance World - June 31

WEBSITES
www.standardchartered.com
www.bajajlallianz.com
www.bimaonline.com

29

Bancassurance

30

Bancassurance

31

Bancassurance