BANCASSURANCE CONTRIBUTES MAJOR CHUNK FOR PRIVATE PLAYERS

Chennai: The insurance sector has witnessed a phenomenal growth over the past few years. In 2007-08, growth in premiums was over 40 per cent. Many private players are growing at rates above 70 per cent. Insurance premium collections have touched 4.1 per cent of the GDP.

Growth in life insurance premiums still come primarily through the efforts of individual agents. But another channel that is fast emerging as a significant source of premium income is bancassurance — especially for private life insurers.

Bancassurance currently contributes close to 35 per cent of the premium collected by private players. In 2006-07, that figure was about 17 per cent. The growth in the bancassurance for insurance companies entirely rests on the number of bank branches that actively distributes these products.

For HDFC Standard life insurance, bancassurance contributed 38 per cent of the new business income in 2007-08, while for Kotak Life and Birla Sun Life the figure was 27 per cent. For SBI this segment contributed close to 41 per cent of the new premium collected in 2008 and grew at over 100 per cent. SBI sold 7 million policies through this channel last year.

On the other hand, ING Vysya Life Insurance witnessed 71 per cent growth on year-on-year basis. In 2005-06 ING Vysya had a tie-up with 37 co-operative banks and it mopped up Rs 7 crore. The number of tie-ups stands at 162 banks and it bought revenue of Rs 46 crore.

Asked about the prospects of bancassurance for ING and for the industry, Mr Rene Van Poel, Director Alternate Channels, explains that according to a recent analysis, bancassurance is likely to generate approximately 35 per cent of private insurers’ premium income by 2008. However, growth in bancassurance in India will fall short of its potential unless the perceived lack of sales culture and vision begin to get addressed by the banks, he said.

Both bankers and insurers are bullish about the future outlook of bancassurance and expect that it would contribute about 50 per cent or more in the life segment in the year 2010. Mr Ajay Srinivasan, Chief Executive, Financial Services, Aditya Birla Management Corporation, said that in India, the number of bank accounts is not even half of the number of mobiles.

If further penetration of banks takes place it will bring more business to the entire financial services industry and increase the contribution of bancassurance, he said.

Source: Suresh Parthasarathy
The Hindu Business Line