PSU banks become aggressive in selling insurance products

Public sector banks, though late entrants, have now become aggressive in selling insurance products. Talks are underway with Indian Banks Association (IBA) to incentivise bank employees.

"We have something in mind to motivate our staff "" monetarily and non-monetarily," said Allahabad Bank chairman and managing director O N Singh.

The public sector bank is also exploring the opportunity of floating a separate subsidiary focused on the sale of insurance and mutual fund products.

Private sector and foreign banks have been aggressive in selling insurance products to their clients, while public sector bank employees have not been as motivated.

"Our hands are still tied, but banks are working with IBA on offering market-driven product-based incentives to employees," said Singh.

"Public sector banks have fairly organised set ups and hence it is easier to influence those employees at private sector and foreign banks in selling of insurance products," said LIC chairman S B Mathur.

The state life corporation is however, keen to tie up with public sector banks as they have significant presence in rural areas, where LIC has a virtual monopoly. "These tie ups can help us expand our reach there as we cannot open up branches in every place," he added.

Allahabad Bank, which is the 27th bank to tie up with the Life Insurance Corporation of India (LIC) as its corporate agent, has set high targets of mobilising premium income of Rs 1 crore each for its "dedicated 135 officers".

"We expect to mobilise Rs 100 crore premium this year, which is expected to earn us a fee-based income of Rs 22-25 crore," said Singh.

Allahabad Bank had earlier signed a referral agreement with ICICI Prudential Life Insurance Company, which has since been broken off.

"They were not paying us enough and we feel LIC has a deeper penetration of the market," said Singh. LIC is seen as a preferred partner for bancassurance tie ups.

LIC hopes to extend its distribution network through the bancassurance route. It has tied up with 27 banks, covering 7,989 outlets across the country. In fiscal 2004, alternate distribution channels including banks contributed Rs 41.89 crore, against its total first year premium income of Rs 8,566.87 crore.