Bancassurance, or selling insurance, products through bank branchers, will play a crucial role in the overall development of the domestic insurance sector, with private insurers expected to mop up 40 per cent of their premium income by 2012 through this distribution model.
"This is significantly higher than the current 25-28 per cent," a Towers Watson India Bancassurance Benchmarking Survey 2009-10 said. The total new business premium income in both the life and general insurance as of February stood at Rs 42,285 crore, according to sectoral regulator Irda data.
"Bancassurance is set to grow. Most insurers are facing cost-pressure in bringing in new business. They are finding it difficult to recruit, train and retain people with turnover rate as high as 70 per cent. This is a big issue and the most viable option for them for distribution is bancassurance," R Krishnamurthy, MD, Towers Watson India, which assists clients on improving insurance distribution practices, told PTI here.
In the general insurance space, at present 17 per cent of the premium income come from bancassurance but with related to public sector players, which are the industry leaders, it is as low as 6 per cent, Krishnamurthy said.
An important step to improve insurance distribution practices, as pointed out by the survey, is for banks to take up distribution activity with more focus through forming distribution companies that could either be wholly-owned by banks or in joint venture with insurers, he said, and pointed out that many bank branches are not still selling insurance products. It is vital to bring make branches to do so.
According to him, many branches are not selling what the customer really needs. "There is a product-push and not sale of what the customer needs. There is an element of mis-selling here," Krishnamurthy said.
On general insurance, he said, "while 93 per cent of the life insurers are using the bancassurance channel, the key factor inhibiting a higher sales growth through bancassurance is the lack of processes for doing so and the comparatively low priority accorded to them amongst the range of products that bank branch managers are now expected to sell."
A major finding of the survey is that banks predominantly sell Ulips and do not show any serious interest in selling traditional or pure protection insurance products. "Almost 90 per cent of bancassurance sales are of Ulips and despite huge customer segments that are under-insured, there seems to be little interest on the part of banks or their insurance partners to tap this potential effectively," the survey said.
The survey was conducted over several months beginning mid-2009 and the survey findings were released late-last week.
Towers Watson is a leading global professional services company that helps organisations improve performance through effective people, risk and financial management.
