Journal Press India^®

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Bancassurance, which basically involves banks acting as corporate agents for insurers to distribute insurance products, has evolved as a strong distribution channel in many countries. Following the deregulation of the Indian insurance industry and the amendment of the insurance law, Indian banks have been looking towards bancassurance as a logical step in the expansion of their business and have planned to venture into this lucrative segment which has hitherto been dominated by few public sector companies. Similarly, new insurers have also viewed banks as an ideal mechanism to gain distribution power.
The present paper is an exploratory study to understand the effectiveness of Bancassurance on three dimensions:

1.   The motivating factors behind the Bancassurance
2.   Potential benefits of Bancassurance
3.   Implementation problems of Bancassurance
Factor analysis that has been used to conclude the findings on one hand has identified greater fee based income, improved profit margins, effective utilization of resources are the motivators for banks to enter into bancassurance, on the other hand factors such as expansion of existing market, access to ready client base of banks and encashing the brand name of banks motivate insurance companies for the same. It also reveals that customers prefer bancassurance to purchase a policy due to more benefits and authenticity. The study concludes that successful bancassurance partnerships in India is due to the fact that by entering into this, both parties have win- win proposition since there is nothing to lose.
Purpose: This study seeks to examine the relatively new trend in insurance distribution channels alternative; namely, Bancassurance: it’s role, benefits, implication, and problems in India. Bancassurance is a new buzzword. While Bancassurance has developed into a tremendous success story in Europe, it has been constrained by legislation in USA and Canada. It is a relatively new concept in Australia and Asia. However, a sea change in the financial service industry is imminent with banks and insurance companies increasingly realizing the strategic significance of Bancassurance in the future viability of their businesses.
Design/Methodology/Approach: The study examines how Bancassurance works in India. There are a number of theoretical reasons as to why banks should enter into the insurance market in India. The main reason behind the bancassurance partnerships in India has been the fact that the banks and insurance both tend to lose nothing. So, marketing of insurance products and earning an additional income is a blessing for the banks. The study is based on survey method.
Findings: (i) Insurance industry has been growing at a commendable pace, (ii) Bancassurance has grown rapidly during the last 10 years, (iii) Private sector banks and private sector insurance companies have been more active, and therefore, beneficiaries of bancassurance, (iv) Private sector’s (banks and insurers) performance has been better than Public sector (banks and insurers), (v) Further research is needed to investigate the relative failure of public sector in regard to bancassurance, (vi) Bancassurance offer huge business potential for banks and insurance companies because of growing banking and insurance sector, and growing economy.
Research Limitations: The study has a number of implications for future research. The present study is restricted to Life Insurance Sector with special emphasis on Bancassurance in Agra District. The secondary information and data available through various official publications is not updated. It lagged behind at least by a year. Gap in data sometimes creates difficulty in drawing right conclusions and submitting worthwhile suggestions.
Practical Implications: Analysis of the study is important for banks and insurance companies to play strategic role in Bancassurance.
Originality/Value: Presently there are very few published academic studies on Bancassurance. It is an emerging field of research and to my knowledge, there are very few journals, which provide a discussion on effectiveness of Bancassurance in India.

Keywords

Bancassurance, Effectiveness, Distribution Channel.

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