The top brass of State Bank of India (SBI) flew to Paris last week to meet up with the top officials of insurer Cardif SA of France.
The SBI team headed by Janki Ballabh, chairman, S Govindrajan managing director, national banking, and R Krishnamurthy, managing director, SBI Life Insurance Company -- met Cardif officials to discuss the business strategy which will bring into play the bancassurance model.
SBI Life's foreign promoter Cardif is bullish on the bancassurance model and feels it is more relevant for a country like India, given the huge spread of banks and branches.
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"Indian bank staff have multi-task orientation in terms of selling a variety of products to customers -- mutual funds, housing loans, fixed deposits, etc. As such it will be easier to train the staff," stated Krishnamurthy.
With more than 50 per cent of banks' branches in the rural markets, the Indian banking industry has a crucial role to play in bringing about a quantum jump in insurance coverage, especially in rural pockets," said Krishnamurthy. The true benefit of bancassurance will be in cutting down of distribution costs, he added.
Cardif's experience in global markets indicates that banks can quickly generate significant, recurrent additional fee income, contributing up to 40 per cent of their retail portfolio. With fee-based income on the decline, banks see sales through the banking channel as a "recurring source of revenue for the branches".
SBI Life is keen to introduce complimentary products that can be introduced through the banking channel. Its performance in the first year failed to meet expectations primarily as the necessary amendment to the Insurance Bill is still pending in the Parliament. SBI Life sold 5,000 policies through its 1,000 tied agency force and mopped up a premium income of around Rs 18 crore.
SBI has so far identified 10 branches in Mumbai, four in Chandigarh and 12 banks in Chennai. The other 13 head offices of SBI are identifying the branches. "We will only look at computerised branches of the bank, and where the consumer appetite is high," said Krishnamurthy.