Previous

Page - 3

Bancassurance Boom

The cellular phone in Reena Sharma's handbag beeps. It's a sale. Sharma has just finalised the sale of a Rs. 20-lakh (Rs. 2 million) term insurance cover to one of her bank's customers. Had Sharma depended on the branch's two direct telephone connections, she would probably have been in no position to close the sale at all.

But thanks to the insurance partner's infrastructure support in terms of a mobile phone, this has been her sixth closure this month. The remote rural branch of the bank where Sharma works has repaid the insurer well, with an average premium of over Rs. 20,000 per policy.

Sam Screwalla has just returned from a village in Gandhinagar district. Having sold over 15 policies last month, Screwalla was given a two-wheeler by the insurance company his bank has tied up with. The two-wheeler is godsend, enabling him to canvass for insurance business outside his branch. Sharma and Screwalla are the pioneers of a new breed of professionals in India - bancassurance workers. Cash registers are ringing as banks capitalise on their network and reach -- accessing the population - to hawk insurance products. Without the insurance company footing his petrol bill, Screwalla would have been unable to work, as public sector banks do not pay any travel allowance to employees for any travel beyond 8 km. And with no direct financial benefit coming to the pockets of bank employees, they have little incentive to move outside the branch.

In India, there are 75 branches per million inhabitants and banks have expertise on the financial needs, saving patterns and life stages of the customers they serve. Clearly, that's something insurance companies both private and state-owned would find nearly impossible to achieve on their own.

Banks also have much lower distribution costs than insurance companies and thus are the fastest emerging distribution channel. Tying up with banks is the logical route for insurers to take achieve extensive geographical spread and countrywide customer access. Until the entry of private insurers, state-owned insurance entities relied solely on the tied agency force and their own employees. The Life Insurance Corporation of India continues to command the largest troupe of agents today, with plans to enhance it further to 11 lakh-strong. But agents and employees have their limitations.

After a while, the less aggressive ones see their sources and contacts dry up, and growth in the sale of new policies decreases. Distances handicap those with a sales drive. Here banks excel. They have a captive and growing customer base they can exploit to cross-sell products.

Selling an insurance product is different from selling a banking product. LIC executive director A. K. Shukla says that despite the creation of awareness in the country, insurance continues to be sold and not bought. In contrast, customers approach banks to buy a product and hence bank employees need not be as aggressive in selling. Unlike its private sector counterparts, which have tie-ups with foreign and private sector banks, the LIC faces a major challenge pushing sales through public sector banks, the key issue being its inability to incentivise bank employees to hawk its products.

• «Previous
• 1
• 2
• 3
• 4
• 5
• 6
• 7
• Next »

E. Jeevitha,
Faculty,
Department of Management Studies and research,
Tamilnadu College of Engineering, Coimbatore.