Solid assurance needed in bancassurance
Mukul K Gupta
11 January 2006
Pune: The growth of private sector insurance companies in India is nothing but phenomenal compared to its peers operating in other emerging Asian economies. In a matter of five years the private players in India have captured around 25 per cent market share. In other Asian economies the new players took over a decade to reach that mark.
But the task was not easy for the Indian private life insurers. One of the major challenges faced by them was the setting up of distribution channels. In fact the entry of private players has brought in significant changes in the latter. Till three years ago, the only mode of distribution of life insurance products was through agents. Today there are alternate channels like bancassurance, brokers, corporate agents and direct marketing through Internet.
Amongst the new distribution channels, the bancassurance route offers immense potential. The channel contributes around 15-18 per cent of the new business procured by the new Indian life insurers. For instance for Bajaj Allianz Life Insurance Company Limited the bancassurance channel contributes about 27 per cent of the new business and is growing at over 200 per cent.
The development of bancassurance has led to many success stories across all sectors - foreign, private and nationalised banks. The banks that have taken the lead in identifying bancassurance in its early stage are now exploiting the twin benefits of deeper customer relationships and enhanced fee income.
Given the deep and wide reach of the public sector and cooperative banks in India (around 65,000+ branches) bancassurance in India is here to stay and grow. It should be noted that parallels cannot be drawn with the older and more developed economies.