Bancassurance
A High Potential for Growth……
The 3rd Middle East Insurance Forum
March 20-21, 2006
Ritz Carlton, Bahrain
Mukul Gupta
CFO & Head Bancassurance
Bajaj Allianz Life Insurance, India
“There is no stronger force than an idea
whose time has come.”
Victor Hugo
(19th Century French Novelist)
Banks & Insurers across the World have realized Bancassurance is
the distribution channel, which would help them achieve
economies of scale and boost their revenues in the 21st Century
Agenda
Impact of Bancassurance on Increasing Insurance
Penetration and Realizing Growth – India Case
Global Bancassurance Trends
Industry Evolution - India
The Bancassurance Opportunity
Case Study : BALIC & Standard Chartered Bank
Case Study – BALIC & Syndicate Bank
Global Bancassurance Trends…
 The key factors impacting development of Bancassurance across the
globe are:
 Regulatory Environment in the country
 Banking Habits – Is Visiting the Bank natural to customers?
 Europe - Bancassurance accounts for the 35% of the sales in the
European life insurance market and is the dominant distribution channel
in a number of South European countries such as Belgium, France, Italy,
Spain and Portugal.
 US – Bancassurance started developing post the crumbling of barriers
set by the Glass-Steagaal Act in late 1990s
 Asia – Bancassurance is in its nascent stage in Asian Life Insurance
Market but is developing very rapidly due to presence of Brick & Mortar
Model of Banking in most of the Asian countries.
Banks dominate Life distribution in Southern
Europe, and making progress in Northern Europe…
Distribution channels - Life
65%
60%
50%
er
m
an
y
14 %
G
et
he
rl a
nd
s
19 %
N
Be
lg
iu
m
Fr
an
ce
Sp
ai
n
Ita
ly
19 %
K
72%
U
82%
Po
rtu
ga
l
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Banks, post office
Insurance co. Employees
Agents
Brokers - IFAs
Success of Bancassurance vary through out Europe due to
different regulatory environment in each country
Others
Recent Bancassurance Trends in Asia…
Estimates of New Business generated from
Bancassurance in 2004
60
In India, Bancassurance
accounts for 22% of the
sales by Private Insurers
Percentage
50
40
30
20
10
Countries
Due to presence of Brick & Mortar Model of Banking, Bancassurance is
increasing its Market Share very rapidly
India
Japan
Thailand
Indonesia
Honkong
Chin a
Singapore
Sou th Korea
Malaysia
0
Choice of Bancassurance Model Depends upon
Strategy & Environment…
Distribution
Agreements
Low
Strategic
Alliances
Joint Ventures
Degree of integration
•Banks distribute life
insurance products
(stand-alone or
bundled with bank
products) in return
for fee income
•No or little sharing of
customer DB
•Limited investment
Low
•A higher degree of
integration in product
development, service
provisions and channel
management
•Possible sharing of
customer DB
•Requires investments in
IT and sales personnel
•Clear mutual
ownership of products
and customers
•Sharing of customer
DBs
•Requires strong and
long-term
commitments from
both sides
Control
Resource commitment
Ability to satisfy customer needs – value added
Reward opportunity
Management complexity
Convergence of interest
Financial
Services Group
High
•Operations and systems
can be fully integrated
•A high capability to
leverage on banks’
existing customer and
other services provisions
•One-stop financial
services
•Potential for fully
integrated products
High
Who bring what to the Partnership…
Bank
Insurer
•Customer base and relationships
•Distribution network
•Brand
50%
•Sales & marketing expertise for insurance products
•Profit maximization selling insurance products
•Strong technical expertise
•Product know-how
•Financial strength
•Brand
Insurance
50%
Bancassurance partnership and distribution agreement to clearly address:
•Volume targets
•Type of products to be sold
•Sharing of margins between
product and distribution
•Sharing of CRM system
•Management responsibility of
the product factory
•Require solid legal contract /
servicing agreements
Key Success Factors…
Commitment
of Partners
Motivation
&
Training of
Bank Staff
Selection of
Selection Customer
Segments
of Partner
Sales &
Distribution
Model
Product
Offerings
Industry Evolution…
No. of Players
Distribution
Focus
Products
Regulatory
Environment
Up to 1999
1999 till 2004
2005 onwards
LIC Monopoly
Private Players
allowed
13 Private Players
No Private Players
allowed
Agency only
800K Agents
Traditional –
Endowments, Money
Back Plans & Wholelife
Primarily Agency
driven regulations
12 new insurers
Agency model
replicated
Bancassurance in
development stage
Emergence of Unit
Linked Products
Primarily Agency
driven regulations
Pvt Insurers gain
over 28% share
Confidence in Bancassurance
BA takes 20% + share among
Private Players
Fastest Growing Distribution
Channel
ULIPs are the most popular
products, accounts for 75% of
Sales through Private
Insurers
Bancassurance regulations
become clearer
Multiple models allowedCA, Referral, Broking
The Bancassurance Opportunity…
Real Potential Still to be Unleashed
• Banks are major players in the Indian Financial system:
• 66,000 branches (32,000 rural and 14,700 semi urban)
• Enormous retail account base of 440 mn deposit accounts
• Total deposit base of Rs. 14 trillion (USD 300 bn)
• Large Structure governed thru’ Regulations
• Four Categories of Banks – Foreign Banks, Nationalised Banks, Private Sector
Banks and Co-operative Banks catering to distinct customer segments
• Over 2500 Banks spread nationally and geographically
• Banking Habits of Customers
• Propensity to Visit Bank Branches
• High Trust in the Banking System
• Bank Managers looked upon as “Financial Advisors”
Only Tip of the Iceberg, in terms of penetration, has been touched
with less than 2% customers of State Owned Banks insured
The Bancassurance Opportunity…
Incremental Financial Household Savings – ‘04
Government bonds
5%
Insurance
14%
Bank deposits
38%
Mutual Funds
1%
o
Co
p
s
nk
ba
lS
al
Sm
2%
s
1%
g
in
av
's
FC
%
10
%
14
Shares & Debentures
1%
NB
cy
en
rr
Cu
PF/Retirement funds
14%
Over 65% of Household financial savings are in short term instruments
Source: RBI Annual Report,
All Data for Yr 20003-04
Case Study : Standard Chartered Bank & BALIC
 Standard Chartered Bank – Largest Foreign Bank in India
 Catering to the High NetWorth clients and the Mass Affluents’
 83 Branch Offices with presence in 25 cities
 Customer Base of 2.50 million
 Deposit Base of over Rs. 135 billion (USD 3 bn)
 Client Habits : Savvy Customer Base with both high branch traffic and
Off-Site Banking habits.
 Joint operations were rolled out in January 2002 with 25 FSCs covering 30
Bank Branches.
Case Study : Standard Chartered Bank & BALIC
Model
 A designated persons stationed in
each Branch selling Insurance.
 Selling thro 11 Channels of
Distribution :- Branch Banking,
Priority Banking, Outbound Sales
Team, Mortgages, Credit Cards etc
 Over 250 Sales Staff dedicated
selling Insurance in these
Distribution Channels
 Dedicated Operation Staff for
processing SCB Proposals
 Fortnightly Saturday Schools for
Sales Staff
Results





The Benchmark for the Indian
Industry for Bancassurance
Bancassurance contributes 20%
of total income from Retail
Banking operations
Avg Productivity per person is
over 12-15 policies per month
and Avg Ticket Size stands at
USD 1,100.
Projected GWP of USD 100 mio
for FY 05-06 & earnings to Bank
to be in range of USD 25-30 mio
Regular UnitLinked Products fit
in the clients needs of the Bank.
Distributions servicing different Customer Segments
Channels of Distributions
In-Branch
Sales Team
Out Bound
Sales Team
Dedicated
Relationship
Managers
Relationship
Managers
Distributions Catering to Different Customer Segments
Retail
Walk-in
customers
Loan
Customers
New
Customers
High
Networth
Customers
SMEs
Channel Distribution : Standard Chartered Bank…
15%
1%
12%
72%
Branch Banking
Priority
OBST
SME
Branch Banking / Walk-ins Contribute over 70% of
Insurance Sales
Case Study : Syndicate Bank & BALIC
 Syndicate Bank – Nationalised Bank with a dominant holding by the
Government
 Catering to Middle Class and Rural Base
 1500 Branch Offices with presence in 500 cities and town
 Customer Base of over 17 million
 Deposit Base of over Rs. 462 bn (USD 10.2 bn)
 Client Habits : Branch Walk-ins for transactions with advice from the
Branch Staff / Manager for all financial decisions
 Bancassurance tie-up with Bajaj Allianz in October 2003
Case Study : Syndicate Bank & BALIC
MODEL
• Integrated Model Implemented with the Bank Staff being regularly
trained to directly sell Insurance to its customers.
• Phase wise Roll Out started in Oct’ 03 with 11 Insurance Managers
covering 40 Branches.
• Currently over 500 branches covered, with 250 Bank employees
selected as Insurance managers & over 75 employees of BALIC, to
promote insurance sales
• Projected GWP of USD 25 mio for FY 05-06 & Earnings to Bank to
be in range of USD 5-8 mio
• Traditional endowment, Pension Product and Mortgage Reducing
Term Assurance are the key products sold.
• Among the most successful Public Sector Bank Distribution tie-up
in India. Over 50,000 policies sold annually
Thank You
Annexures
Insurance Industry in India…
13 Private players in the market today:
 6 Bank owned insurers- HDFC Standard Life, ICICI
Prudential, ING Vysya, Metlife, OM Kotak, SBI Life
 7 Independent Insurers- Bajaj Allianz , Birla Sun Life, Aviva,
Max New York Life, Tata AIG, Reliance Life and Sahara Life
 LIC – The state Insurer is the dominant player with over 70%
of the market share
 Total Life Market Size at Rs. 250 billion (USD 5.5. Bn)
Consideration for Banks…
1. Increase in Fee Based Income
6. Provide integrated
financial services tailored to
the life cycle of customers
2. Reduce reliance on
interest spreads as the major
source of income
16 12/3 %
16 62/3 %
2 %
16 2/3
16 2/3 %
16 2/3 %
3
5
16 2/3 %
5. Reduce risk based capital
req. for the same level of
revenue
4
4. One stop shop for all
Financial Services
3. Leverage extensive
customer base
Consideration for Insurers…
Immediate access to New
Markets
Improve sales
effectiveness & after sales
service
Increase in Market
Penetration
Insurer
Reduce reliance on
traditional distribution
channel
Develop new financial
products more efficiently
Combine Cost Saving &
Increased Profitability
Bancassurance Models Worldwide…
Distribution
Agreements
Strategic Alliances
Joint Ventures
Financial Services
Group
European Life bancassurers progressively abandon the intermediary role to gain access to long-term
profits (bank-owned model)
Germany: numerous cross
share-holdings
between
banks & insurers make
acquisitions or mergers more
difficult
Italy
France: bank-owned units = 56%
of total Life & pension premiums
vs. 44% for the distribution
agreement
Netherlands, branch networks
Asia: mainly distribution agreements & strategic alliances, other
models facing regulatory restrictions
S Korea,
India, China,
Japan
Spain
US: mainly distribution
agreements & banks
acquiring large brokers.
Concentration on Life
products.
Singapore