Bancassurance has emerged as the most popular additional distribution channel after the age-old `agency' channel in view of the wide reach that banks have. There are 70,000 bank branches in India having more than 20 crores of savings accounts. The article deals with issues, opportunities, challenges and problems in this area, with particular reference to life insurance selling through banks.

The life insurance market has undergone a sea-change after the portfolio was liberalized and opened to the private players in the year 1999. We can even call the period as BC & AC (not before Christ and after Christ, but Before Competition and After Competition) since a host of alternate distribution channels have come into the market, besides the one and the only `Tied' agency channel. It is desirable to call them as additional distribution channels and not alternate distribution channels.

The `Tied' agency channel reigns supreme as far as the market leader, LIC of India, is concerned— having 15 lakhs agents and procuring 98% of the business share. For the private players, the other channels bring in 20 to 60% of new business.

There are around 30 lakhs agents in the life insurance industry—15 lakhs with LIC of India and the rest with the private insurers. There is a need for more in view of the vast potential India has for insurance penetration. With more than a billion population, there are 300 million middle-class people in this country eligible to be insured. The GDP in the past few years has recorded an average growth of 8%. The savings constitute 26% of GDP. The buoyant capital market is another plus point. India is the 4^th largest country in the world in terms of Purchasing Power Parity (PPP). The Confederation of Indian Industry (CII) estimates that the life insurance market will grow to Rs. 1,40,000 cr by 2010.

In the backdrop of this rosy picture, it is not surprising that the agents' income has grown enormously in the last few years, especially after the sector has been opened up. During 1999-2000, when LIC was the only player in the field, Rs. 2,507 cr was paid as commission to their 7.15 lakh agents. This grew to Rs. 3,170 cr in 2000-01, which included three private players along with LIC. This amount touched a high of Rs. 8,635 cr (16 players) during 2005-06. During 2008-09, the agents' income reached a whopping figure of Rs. 15,337 cr. Out of this figure, new business commission and renewal commission for LIC was 51% and 49% respectively. For the industry as a whole, the figures were 58% and 42% respectively.

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