BANCASSURANCE IN INDIA

After First Narasimham Committee report, Indian banking system gone through huge reforms like merchant banking, lease and term finance, capital market / equity market related activities, hire purchase, real estate finance and so on. Few years back banks of India entered into another financial instrument that’s Insurance.

Let’s have a quick look on Indian insurance market as at end-March 2006, among the life insurers, there were 15 companies in private sector and Life Insurance Corporation of India (LIC) was the solitary public sector company. Among non-life insurers, 9 companies were in private sector and 4 companies were in public sector as regarding the present size of the insurance market in India, it is stated that India accounts not even 1% of the global insurance market. According to various studies, in India LIC done exceptionally very good job but its able to insured 25-26% of insurable population.

Thus in a country with more than 1.2 billion population, the penetration ratio was 4.8% by end of march-2006 which was far less than world’s penetration ratio (7.5%). It also indicates that a vast majority of population remain outside the reach of the insurance, especially in rural and semi-urban areas, in the context of the absence of social security schemes.

In year 2004, due to these vulnerable statistics, IRDA introduced an additional channel of distribution in way long traditional distribution model of Insurance industry called Bancassurance.

The prospects of bancassurance in India is really bright because of following reasons:

• Indian economy is growing with 9% of growth rate.
• Increasing PPP (purchasing power parity).
• Huge inflow of FDI.
• Expansion of middle income class Indians.
• Huge banking infrastructure across urban, semi urban & rural India.
• BASEL NORM-II (2009)

Another reasons are:

In 2007, India has 88 scheduled commercial banks (SCBs) - 28 public sector banks (that is with the government of India holding a stake), 29 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 31 foreign banks. Altogether they (banks) have a combined network of over 53,000 branches and reach in urban, semi urban & rural areas of nation. There are 70324 bank offices are there in India and around 16000 people are served by each bank office. It’s a huge banking infrastructure and among best banking network in world.

Why banks are very much interested in bancassurance?

Related Posts:

Bancassurance: An Overview