mukul gupta cfo & head bancassurance bajaj allianz life insurance, india
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Bancassurance A High Potential for Growth……. The 3 rd Middle East Insurance Forum March 20-21, 2006 Ritz Carlton, Bahrain. Mukul Gupta CFO & Head Bancassurance Bajaj Allianz Life Insurance, India. “There is no stronger force than an idea whose time has come.”. Victor Hugo - PowerPoint PPT PresentationTRANSCRIPT
Mukul GuptaCFO & Head BancassuranceBajaj Allianz Life Insurance, India
Bancassurance
A High Potential for Growth……
The 3rd Middle East Insurance ForumMarch 20-21, 2006
Ritz Carlton, Bahrain
“There is no stronger force than an idea whose time has come.”
Victor Hugo(19th Century French
Novelist)
Banks & Insurers across the World have realized Bancassurance is the distribution channel, which would help them achieve economies of scale and boost their revenues in the 21st Century
AgendaImpact of Bancassurance on Increasing Insurance Penetration and Realizing Growth – India Case
Global Bancassurance Trends Industry Evolution - IndiaThe Bancassurance OpportunityCase Study : BALIC & Standard Chartered BankCase Study – BALIC & Syndicate Bank
Global Bancassurance Trends… The key factors impacting development of
Bancassurance across the globe are: Regulatory Environment in the country
Banking Habits – Is Visiting the Bank natural to customers? Europe - Bancassurance accounts for the 35% of the sales in
the European life insurance market and is the dominant distribution channel in a number of South European countries such as Belgium, France, Italy, Spain and Portugal.
US – Bancassurance started developing post the crumbling of barriers set by the Glass-Steagaal Act in late 1990s
Asia – Bancassurance is in its nascent stage in Asian Life Insurance Market but is developing very rapidly due to presence of Brick & Mortar Model of Banking in most of the Asian countries.
Banks dominate Life distribution in Southern Europe, and making progress in Northern Europe…Distribution channels - Life
82%72%
65% 60%50%
19% 19% 14%0%
10%20%30%40%50%60%70%80%90%
100%
Banks, post off ice Insurance co. Employees Agents Brokers - IFAs Others
Success of Bancassurance vary through out Europe due todifferent regulatory environment in each country
Recent Bancassurance Trends in Asia…
Estimates of New Business generated from Bancassurance in 2004
0
10
20
30
40
50
60
Countries
Perc
enta
ge
Due to presence of Brick & Mortar Model of Banking, Bancassurance is increasing its Market Share very rapidly
In India, Bancassurance accounts for 22% of the sales by Private Insurers
Distribution Agreements
Strategic Alliances Joint Ventures Financial
Services GroupLow Degree of integration High
•Banks distribute life insurance products (stand-alone or bundled with bank products) in return for fee income
•No or little sharing of customer DB
•Limited investment
•A higher degree of integration in product development, service provisions and channel management
•Possible sharing of customer DB
•Requires investments in IT and sales personnel
•Clear mutual ownership of products and customers
•Sharing of customer DBs
•Requires strong and long-term commitments from both sides
•Operations and systems can be fully integrated•A high capability to leverage on banks’ existing customer and other services provisions•One-stop financial services•Potential for fully integrated products
Low
High
Control Resource commitment
Ability to satisfy customer needs – value added
Reward opportunityManagement complexityConvergence of interest
Choice of Bancassurance Model Depends upon Strategy & Environment…
Insurer•Sales & marketing expertise for insurance
products•Profit maximization selling insurance
products•Strong technical expertise•Product know-how•Financial strength•Brand
Bank•Customer base and
relationships•Distribution network•Brand
50% 50%Insurance
Bancassurance partnership and distribution agreement to clearly address:•Volume targets
•Type of products to be sold
•Sharing of margins between product and distribution
•Sharing of CRM system
•Management responsibility of the product factory
•Require solid legal contract / servicing agreements
Who bring what to the Partnership…
Key Success Factors…
Sales & Distribution
Model
Commitment of Partners
ProductOfferings
Motivation &
Training ofBank Staff
Selection of CustomerSegments
Selection of Partner
Industry Evolution…
No. of Players
LIC Monopoly
No Private Players allowed
Private Players allowed12 new insurers
13 Private Players
Pvt Insurers gain over 28%
share
Up to 1999 1999 till 2004 2005 onwards
Regulatory Environment
Primarily Agency driven regulations
Bancassurance regulations become
clearerMultiple models
allowed- CA, Referral, Broking
Primarily Agency driven regulations
Distribution Focus
Agency only800K Agents
Agency model replicated
Bancassurance in development
stage
Confidence in Bancassurance
BA takes 20% + share among Private Players
Fastest Growing Distribution Channel
Products Traditional – Endowments,
Money Back Plans & Wholelife
Emergence of Unit Linked Products
ULIPs are the most popular products,
accounts for 75% of Sales through Private
Insurers
• Banks are major players in the Indian Financial system:
• 66,000 branches (32,000 rural and 14,700 semi urban)• Enormous retail account base of 440 mn deposit accounts• Total deposit base of Rs. 14 trillion (USD 300 bn)
• Large Structure governed thru’ Regulations• Four Categories of Banks – Foreign Banks, Nationalised Banks, Private
Sector Banks and Co-operative Banks catering to distinct customer segments
• Over 2500 Banks spread nationally and geographically
• Banking Habits of Customers• Propensity to Visit Bank Branches • High Trust in the Banking System• Bank Managers looked upon as “Financial Advisors”
The Bancassurance Opportunity…Real Potential Still to be
Unleashed
Only Tip of the Iceberg, in terms of penetration, has been touched with less than 2% customers of State Owned Banks insured
The Bancassurance Opportunity…
Insurance14%
Government bonds5% Bank deposits
38%Mutual Funds
1%
PF/Retirement funds14%
Shares & Debentures1%
Over 65% of Household financial savings are in short term instruments
Source: RBI Annual Report,
All Data for Yr 20003-04
Incremental Financial Household Savings – ‘04
Case Study : Standard Chartered Bank & BALIC Standard Chartered Bank – Largest Foreign Bank in India
Catering to the High NetWorth clients and the Mass Affluents’
83 Branch Offices with presence in 25 cities
Customer Base of 2.50 million
Deposit Base of over Rs. 135 billion (USD 3 bn)
Client Habits : Savvy Customer Base with both high branch traffic and Off-Site Banking habits.
Joint operations were rolled out in January 2002 with 25 FSCs covering 30 Bank Branches.
Model A designated persons stationed
in each Branch selling Insurance.
Selling thro 11 Channels of Distribution :- Branch Banking, Priority Banking, Outbound Sales Team, Mortgages, Credit Cards etc
Over 250 Sales Staff dedicated selling Insurance in these Distribution Channels
Dedicated Operation Staff for processing SCB Proposals
Fortnightly Saturday Schools for Sales Staff
Case Study : Standard Chartered Bank & BALIC
Results The Benchmark for the
Indian Industry for Bancassurance
Bancassurance contributes 20% of total income from Retail Banking operations
Avg Productivity per person is over 12-15 policies per month and Avg Ticket Size stands at USD 1,100.
Projected GWP of USD 100 mio for FY 05-06 & earnings to Bank to be in range of USD 25-30 mio
Regular UnitLinked Products fit in the clients needs of the Bank.
Distributions servicing different Customer Segments
In-Branch Sales Team
Out Bound Sales Team
Dedicated Relationsh
ip Managers
Relationship Managers
Channels of Distributions
Retail Walk-in
customers
Loan Customer
s
High Networth
CustomersSMEs
New Customer
s
Distributions Catering to Different Customer Segments
Channel Distribution : Standard Chartered Bank…
72%
12%
15% 1%
Branch Banking Priority OBST SME
Branch Banking / Walk-ins Contribute over 70% of Insurance Sales
Case Study : Syndicate Bank & BALIC
Syndicate Bank – Nationalised Bank with a dominant holding by the Government
Catering to Middle Class and Rural Base
1500 Branch Offices with presence in 500 cities and town
Customer Base of over 17 million
Deposit Base of over Rs. 462 bn (USD 10.2 bn)
Client Habits : Branch Walk-ins for transactions with advice from the Branch Staff / Manager for all financial decisions
Bancassurance tie-up with Bajaj Allianz in October 2003
MODEL• Integrated Model Implemented with the Bank Staff being
regularly trained to directly sell Insurance to its customers.• Phase wise Roll Out started in Oct’ 03 with 11 Insurance
Managers covering 40 Branches. • Currently over 500 branches covered, with 250 Bank
employees selected as Insurance managers & over 75 employees of BALIC, to promote insurance sales
• Projected GWP of USD 25 mio for FY 05-06 & Earnings to Bank to be in range of USD 5-8 mio
• Traditional endowment, Pension Product and Mortgage Reducing Term Assurance are the key products sold.
• Among the most successful Public Sector Bank Distribution tie-up in India. Over 50,000 policies sold annually
Case Study : Syndicate Bank & BALIC
Thank You
Annexures
13 Private players in the market today:
6 Bank owned insurers- HDFC Standard Life, ICICI Prudential, ING Vysya, Metlife, OM Kotak, SBI Life
7 Independent Insurers- Bajaj Allianz , Birla Sun Life, Aviva, Max New York Life, Tata AIG, Reliance Life and Sahara Life
LIC – The state Insurer is the dominant player with over 70% of the market share
Total Life Market Size at Rs. 250 billion (USD 5.5. Bn)
Insurance Industry in India…
Consideration for Banks…
16 2/3 %
16 2/3 %
16 2/3 %
16 2/3 %
16 2/3 %
16 2/3 %
1
1. Increase in Fee Based Income
2
2. Reduce reliance on interest spreads as the major source of
income
33. Leverage extensive
customer base4
4. One stop shop for all Financial Services
5
5. Reduce risk based capital req. for the
same level of revenue
6
6. Provide integrated financial services tailored to the life cycle of customers
Consideration for Insurers…Immediate access to
New Markets
Increase in Market Penetration
Reduce reliance on traditional
distribution channel
Combine Cost Saving & Increased
Profitability
Develop new financial products more efficiently
Improve sales effectiveness & after
sales service
Insurer
Distribution Agreements
Strategic Alliances
Joint Ventures Financial Services Group
European Life bancassurers progressively abandon the intermediary role to gain access to long-term profits (bank-owned model)
France: bank-owned units = 56% of total Life & pension premiums vs. 44% for the distribution agreement
Spain
Netherlands, branch networks
Germany: numerous cross share-holdings between banks & insurers make acquisitions or mergers more difficult Italy
Asia: mainly distribution agreements & strategic alliances, other models facing regulatory restrictions
SingaporeS Korea,
India, China, Japan
US: mainly distribution agreements & banks acquiring large brokers. Concentration on Life products.
Bancassurance Models Worldwide…