Page 22 - Life Insurance Today FEBRUARY 2016

many changes. At the end of March 2014, there are 53
insurance companies operating in India; of which 24 are in
the life insurance business and 28 are in non-life insurance
business.

In addition, GIC is the sole national reinsurer. Of the 53
companies presently in operation, eight are in the public
sector - two are specialized insurers, namely ECGC and AIC,
one in life insurance namely LIC, four in non-life insurance
and one in reinsurance. The remaining forty five companies
are in the private sector. (IRDA Annual Report 2013-14).

Life insurance industry recorded a premium income of Bancassurance will spread awareness and promote
Rs.3,14,283 crore during 2013-14 as against Rs. 34,898.47 insurance across various segments of the society through
crore in 2000-01. The CAGR (Compound Annual Growth the bank branch network. Banks can perceive
Rate) during this period is 18.42% per year. Following the bancassurance as a customer retention strategy by making
recommendations of the Malhotra Committee report, in available all financial products and services at one stop by
1999, the Insurance Regulatory and Development increasing the quality of the customer experience.
Authority (IRDA) was constituted as an autonomous body Bancassurance also provides fee-based income to banks.
to regulate and develop the insurance industry.
Besides, the customers respond more to their bankers as
The life insurance industry in India has been progressing at the latter is expected to have a better understanding of
a rapid pace particularly after the year 2000. The entry of the former's financial needs. Bancassurance saves costs to
private banks after 2003 increased FDI (Foreign Direct the insurance companies by means of cost reduction in
Investment) in equity to 49% placed additional challenges selecting, training, motivating, and compensating the
to the insurance sector. agents. However, banks must ensure that procedures
related to claim settlement and policy servicing should not
Subsequently, the Government of India specified insurance result in administrative and legal issues from its customers.
as a permissible form of business under section 6 (1) of the
Banking Regulation Act, 1949, was issued on August 3, Bancassurance is in a different stage of maturity across
2000 and accordingly the guidelines were issued. On the different regions but is expected to grow at a high rate with
side of banking sector, with the opening up of private banks, the commission earned through bancassurance expected
due to intense competition, banks are to look for to grow globally at a CAGR of 5.29% between 2013 and
alternative sources of revenue. This led to the evolution of 2017.
'Bancassurance'. "Bancassurance" refers to distribution of
insurance products through banking channels. It involves Although agents and broker remain the major distribution
three parties - the banker, insurer and the policy holder. channels, alternative channels such as the internet,
banccassurance, and social media are rapidly finding favor
Insurance is very important particularly in a country like with insurance customers.(Trends in Insurance Channels
India as insurance is more sold than bought. Although, 2013: Key emerging business and technology trends across
there are various channels for marketing insurance insurance channels, Capgemini).
products, the country, with its rural population percentage
covering as much as 70%, requires a unique channel which
enables to bring insurance products to reach the common
man through a local bank branch- alternatively called as
Bancassurance channel.

"A room without books is like a body without a soul."

22 February 2016 Life Insurance Today

Copyright@ The Insurance Times. 09883398055 / 09883380339