In a country of over a billion people, mass marketing may be a profitable and costeffective option for gaining market share. Therefore, identifying the right life insurance distribution channels to harness the full potential of the market is imperative. Bancassurance is an instant channel to reach out to a large number of customers and access a wide base through the network across the geographical span of the country. This paper deals with the scope of bancassurance in the Indian life insurance industry, which has been operating only through agents until now and aims to evaluate the ways in which distribution function is changing with increase in competition and development of new distribution channels like banks, brokers, internet, corporate/institution. It also deals with the challenges in distribution; growth potential; the benefits to insurance companies; the benefits to banks and customers; the critical success factors; the manner in which companies select banks; international experiences; and the future of bancassurance in India.
Insurance
is essentially protection against any loss or damage in which a number of individuals
agree to transfer risk by paying specified amounts of money, called premiums.
These premiums create a pool of money that guarantees the individuals compensation
for losses caused by occurrences of events. The life insurance industry in India
dates back to 1818, when a British firm, Oriental Life Insurance Company, started
functioning in Kolkata. In spite of early incidence of insurance in India, the
country seems to have made some headway in taking the concept to the masses. In
India, insurance penetration and insurance density were very low compared to the
world's average in the year 200405, the insurance penetration being 2.53% and
insurance density 15.7%.
To
get a pie in the huge Indian market, there are 15 private companies operating
in India out of which 12 are backed up by foreign partners. These companies are
trying to woo customers through innovative advertising, introducing new products,
emphasizing on new information and communication technologies, and new distribution
channels. There are many distribution channels through which insurance products
are being sold, apart from agents. The other channels are: Internet, banks, brokers,
corporate agents, etc. The role of distribution channels has become very important
because through these channels, companies can approach a large number of customers. |
