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Faculty Of Commerce

YEAR 2016-2018








Supervised by: Submitted by:

Prof. K.K. Mishra Snehlata Jaiswal

Faculty of Commerce MBA (RI)
Faculty of Commerce
Enroll no.-335483

I hereby declare that the project work entitled

“Bancassurance in India”, is a record of an original
work done by me under the guidance of Prof. K.K
Mishra, Faculty of Commerce.This project work is
submitted in the partial fulfillment of the requirements
for the award of the degree of Master of Business
Administration with specialization in Risk & Insurance.
The results embodied in this dissertation have not been
submitted to any other University or Institute for the
award of any degree.

Snehlata Jaiswal


It gives me immense pleasure to express my sincerest

thanks to Prof. K.K Mishra, Faculty of Commerce
under whose guidance I was able to learn and excel my

I would also take the pleasure to thank Prof. C.P Mall,

Head & Dean, Faculty of Commerce and Prof. A.R
Tripathi, Course Co-ordinator & other faculties for
their constant motivation and valuable help throughout
the dissertation.

Finally, I would like to express my greatest thanks and

regards to my family and friends because without their
support and encouragement everything would have been

I would like to dedicate my project to my parents.

Snehlata Jaiswal



This is to certify that Ms Snehlata Jaiswal student of

Master Of Business Administration (Risk &
Insurance),4th semester,Faculty Of Commerce,Banaras
Hindu University did her dissertation project on the
topic “Bancassurance In India” under my supervision
and guidance for the session 2017-2018.

Her dissertation project entitled “Bancassurance In

India” embodies the result of her investigation .During
the project she was found sincere and dedicated towards
her work.

I wish her All The Very Best for her future.




Faculty Of Commerce

Banaras Hindu University


I feel greatly enthusiastic in presenting this dissertation

report. I have tried to present the various aspect of
“Bancassurance in India”. It was a pleasure to work on
this report.

I have tried to create an understanding on the current

scenario of Bancassurance in India, regulations
imposed on the Bancassurance Companies and various
tie ups of banks with insurance companies.

All my efforts would succeed if my report satisfies the

reader, as I have tried to do the same.

Snehlata Jaiswal



Serial No. Chapters

1 Introduction

2 Research Methodology

3 Bancassurance –An Overview

4 Bancassurance In India

5 Regulations for Bancassurance

Companies In india
6 Bancassurance Tie –Ups In India

7 Findings,Conclusions &



A Bank is a financial institution that accepts the deposits
from the public and creates credit. Lending activities can
be performed either directly or indirectly through capital
market. Banks may also provide financial services such
as currency exchange, wealth management and safe

Due to their importance in the financial stability banks

are highly regulated in most countries. Most nations
have institutionalized a system known as Fractional
Reserve Banking under which the banks hold liquid
assets equal to only a portion of their current liabilities.

According to P.A.Samuelson: Bank provides service to
its clients and in turn receives perquisites in different

According to Sir John Pagette: Bank is such a financial

institution which collects money in current,savings or
fixed deposit account;collects cheque as deposits and
pays money from the depositors account through

According to Whitehead: A Bank is defined as an

institution which collects surplus funds from the public
safeguards them and makes them available to the true
owner when required and also lend sums to their true
owner to those who are in need of funds and can provide

According to Banking Companies act 1949: Banking

company in India has been defined as one which
transacts the business of banking which means the
accepting for the purpose of lending or investment of the
deposits of public repayable on demand ,or otherwise
and withdrawable by cheque, draft, order or otherwise.

The banking system is an integral subsystem of the

financial system.It represents an important channel of
collecting the small savings from the households and
lending it to the corporate sectors.The Indian banking
system has Reserve Bank Of India as an apex body for
all matters relating to the banking system.It is the central
bank of India.It is also known as the Banker to all other.

Banking in India originated in last decade of 18th
century. Among the first banks were the Bank Of
Hindustan, which was established in 1770 and liquidated
in 1829-32 and the General Bank Of India established in
1786 but both failed in 1791.The India’s oldest bank
which is in existence is the State Bank Of India being
established as the Bank Of Bengal in Calcutta in June in
year 1806.This was one of the three presidency banks,
the other two being the Bank Of Bombay and the Bank
Of Madras, all three of which were established under
charters from the British East India Company. For many
years , the Presidency banks acted as a quasi central
banks. The three banks merged in 1921 to form the
Imperial Bank Of India which upon the India’s
independence became the State Bank Of India.

Punjab National Bank was established expanding the

market by 1900’s,Bank Of India in Lahore in 1895 and
the same Bank Of India in Mumbai in 1906 both were
founded under the private ownership. Then later in year
1935,the Reserve Bank Of India formally took over the
responsibility of regulating the banking sector. In year
1947,after the India’s independence the reserve bank
was nationalized and being given more powers.

The Indian Banking Industry in 1960 became an

important tool to facilitate the financial development of
the Indian economy. Simultaneously, it emerged as a
large employer and debate prevailed that ensured about
the possibility of nationalization of banking industry.

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In 1960,the State Bank Of India was given control of
eight state associated banks under the State Bank Of
India (subsidiary banks)act 1959.These banks are now
called its Associate Banks. Since 1969,tremendous
changes have taken place in the banking industry. The
banks have shed their traditional functions and have
been innovating, Improving and coming out with new
types of the services to cater to the emerging needs of
their customers.

There has been a considerable innovation and

diversification in the business of major banks. Some of
them have engaged in the areas of consumer credit,
credit cards, leasing, merchant banking etc.

In 1978 the Indian government nationalized 14 major

private banks. In 1978,6 more private banks were
nationalized. These nationalized banks are the majority
of lenders in the Indian economy. They dominate the
banking sector because of their large size and
widespread networks.

The Indian Banking Sector is broadly divided into

Scheduled and Non Scheduled banks. The Scheduled
banks are those included under the second schedule of
RBI Act 1934.The Scheduled banks are further classified
into nationalized banks State Bank of India and its
associates, regional rural banks, foreign banks and other
Indian private sector banks. The commercial banks refer
to both scheduled and non scheduled commercial banks
regulated under the Banking Regulation Act 1949.

11 | P a g e
As per the RBI, India’s banking sector is sufficiently
capitalized and well regulated. The financial and
economic conditions in the country are far superior to
any other country in the world. Credit, market and
liquidity risk studies suggests that the Indian banks are
generally resilient and have withstood the global
downturn well.

Indian banking industry has recently witnessed the roll

out of innovative banking models like payments and
small finance banks. RBI’s new measures may go a long
way in helping the restructuring of the domestic banking

The digital payments system in India has evolved the

most among 25 countries with India’s Immediate
Payment Service(IMPS)being the only system at the
level 5 in the Faster payment Innovation Index(FPII).

In august 2017,Global rating agency Moody’s

announced that its outlook for the Indian banking system
was stable.

12 | P a g e
Market Size:
 The Indian banking system consists of 27 public
sector banks,26 private banks,46 foreign
banks,56 regional rural bank ,1574 urban
cooperative banks and 93913 rural cooperative
banks. Banks are also encouraging their
customers to manage their finances using the
mobile phones.
 As the RBI allows more features such as
unlimited fund transfers between wallets and
bank accounts, mobile wallets are expected to
become strong players in the financial

The unorganized sector in India has huge untapped

potential for adopting the digital mode of payments
as 63% of the retailers are interested in using the
digital payments.

ICRA estimates that the credit growth in India’s

banking sector would be at 7-8% in FY 2017-18

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Investments and Developments:
Key investments and developments in India’s banking
industry include:

 The bank recapitalization plan by GOI is

expected to push the credit growth in the country
to 15% and as a result help GDP grow by 7%in
FY 19.

 Public sector banks are lining upto raise funds

via qualified institutional placements

 The RBI amends the statues thereby allowing

the lenders to invest in the real estate investment
trusts not exceeding 10% of the unit capital of
such investments.

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Government Initiatives:

The govt is planning to introduce a two

percentage point discount in GST on B2C
transactions made via digital payments.

A new portal named “Udyami Mitra”has been

launched by SIDBI with the aim of improving
the credit availability to MSME in a country.

Under the union budget 2018-19 the govt has

allocated Rs 3 trillion towards the Mudra
Scheme and Rs 3794 cr towards the credit
support,capital and interest subsidy to MSME’s.

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Features Of Bank:

 Money dealing
 Acceptance of deposits
 Grant of loans and advances
 Transfer of funds
 Portfolio management
 Foreign exchange dealing
 Payment and withdrawal of deposits
 Agency and utility services

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Insurance is a means of protection from financial loss.

It is a form of risk management primarily used
to hedge against the risk of a contingent, uncertain loss.
An entity which provides insurance is known as an
insurer, insurance company, insurance carrier
or underwriter. A person or entity who buys insurance is

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known as an insured or policyholder. The insurance
transaction involves the insured assuming a guaranteed
and known relatively small loss in the form of payment
to the insurer in exchange for the insurer's promise to
compensate the insured in the event of a covered loss.
The loss may or may not be financial, but it must be
reducible to financial terms, and usually involves
something in which the insured has an insurable
interest established by ownership, possession, or
preexisting relationship.

The insured receives a contract, called the insurance

policy, which details the conditions and circumstances
under which the insurer will compensate the insured.
The amount of money charged by the insurer to the
insured for the coverage set forth in the insurance policy
is called the premium. If the insured experiences a loss
which is potentially covered by the insurance policy, the
insured submits a claim to the insurer for processing by
a claims adjuster. The insurer may hedge its own risk by
taking out reinsurance, whereby another insurance
company agrees to carry some of the risk, especially if
the risk is too large for the primary insurer to carry.

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According to Riegel and Miller:

“Insurance is a social device whereby uncertain risks of

individuals may be combined in a group and thus made
more certain ;small periodic contributions by the
individuals providing a fund out of which those who
suffer losses may be reimbursed.”

According to J.B.Maclean:

“Insurance is a method of spreading over large number

of persons a possible financial loss too serious to be
conveniently borne by an individual.”

According to Dictionary of Business and Finance:

“Insurance is a form of contract or agreement under

which one party agrees in return for a consideration to
pay an agreed amount of money to another party to make
good for a loss, damage or injury to something of value
in which the insured has a pecuniary interest as a result
of some uncertain event.”

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Most Important Principles of Insurance:-

The important principle of insurance are as follows:
The main motive of insurance is cooperation. Insurance
is defined as the equitable transfer of risk of loss from
one entity to another, in exchange for a premium. When
a company insures an individual entity, there are some of
the basic legal requirements. Several commonly cited
legal principles of an insurance are as follows:

1. Nature of contract:

Nature of contract is a fundamental principle of

insurance contract. An insurance contract comes into
existence when one party makes an offer or proposal of a
contract and the other party accepts the proposal.

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A contract should be simple to be a valid contract. The
person entering into a contract should enter with his free

2. Principal of utmost good faith:

Under this insurance contract both the parties should

have faith over each other. As a client it is the duty of
the insured to disclose all the facts to the insurance
company. Any fraud or misrepresentation of facts can
result into cancellation of the contract.

3. Principle of Insurable interest:

Under this principle of insurance, the insured must have

interest in the subject matter of the insurance. Absence
of insurance makes the contract null and void. If there is
no insurable interest, an insurance company will not
issue a policy.

An insurable interest must exist at the time of the

purchase of the insurance. For example, a creditor has an
insurable interest in the life of a debtor, A person is
considered to have an unlimited interest in the life of
their spouse etc.

The insured typically must directly suffer from the loss.

Insurable interest must exist whether the property
insurance or insurance of a person is involved.

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4. Principle of indemnity:

Indemnity means security or compensation against loss

or damage. The principle of indemnity is such principle
of insurance stating that an insured may not be
compensated by the insurance company in an amount
exceeding the insured’s economic loss.

In type of insurance the insured would be compensation

with the amount equivalent to the actual loss and not the
amount exceeding the loss.

This is a regulatory principal. This principle is observed

more strictly in property insurance than in life insurance.

The purpose of this principle is to set back the insured to

the same financial position that existed before the loss or
damage occurred.

5. Principal of subrogation:

The principle of subrogation enables the insured to claim

the amount from the third party responsible for the loss.
It allows the insurer to pursue legal methods to recover
the amount of loss,on behalf of the insured. For example,
if you get injured in a road accident, due to reckless
driving of a third party, the insurance company will
compensate your loss and will also sue the third party to
recover the money paid as claim.

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6. Double insurance:

Double insurance denotes insurance of same subject

matter with two different companies or with the same
company under two different policies. Insurance is
possible in case of indemnity contract like fire, marine
and property insurance.

Double insurance policy is adopted where the financial

position of the insurer is doubtful. The insured cannot
recover more than the actual loss and cannot claim the
whole amount from both the insurers.

7. Principle of proximate cause:

Proximate cause literally means the ‘nearest cause’ or

‘direct cause’. This principle is applicable when the loss
is the result of two or more causes. The proximate cause
means; the most dominant and most effective cause of
loss is considered. This principle is applicable when
there are series of causes of damage or loss.

8. Principle of warranty:

A warranty is that by which the assured undertakes that

some particular thing shall or shall not be done. Those
certain conditions shall be fulfilled.

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9. Principle of Probability:

The entire science of insurance is based on the theory of

probability and the entire business of insurance is carried
on the application of this theory.

10. Principle of Cooperation:

Insurance is based on the cooperative endeavour. The

risk of an individual is to be shared by many so as to
reduce the share of an individual.

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It’s now been more than a decade since the opening up
of the insurance sector in India to the private sector and
for foreign players. The past decade has seen
considerable growth in the insurance sector and has seen
the introduction of a large number of innovative
products – a natural and positive outcome of increasing
competition. The insurance sector plays a very crucial
role in the economy of any country – it increases
avenues for savings of individuals, protects the future of
individuals and spreads risks of institutions by forming a
large pool of fund. The sector also contributes
significantly to the capital markets and assists in large
capital infrastructure developments of our country
through their funds.

Insurance in its current form has its history dating back

until 1818, when Oriental Life Insurance Company was
started in Kolkata to cater to the needs of European
community. The pre-independence era in India saw
discrimination between the lives of foreigners (English)
and Indians with higher premiums being charged for the
latter. In 1870, Bombay Mutual Life Assurance
Society became the first Indian insurer.

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At the dawn of the twentieth century, many insurance
companies were founded. In the year 1912, the Life
Insurance Companies Act and the Provident Fund Act
were passed to regulate the insurance business. The Life
Insurance Companies Act, 1912 made it necessary that
the premium-rate tables and periodical valuations of
companies should be certified by an actuary. However,
the disparity still existed as discrimination between
Indian and foreign companies. The oldest existing
insurance company in India is the National Insurance
Company , which was founded in 1906, and is still in
The Government of India issued an Ordinance on 19
January 1956 nationalising the Life Insurance sector and
Life Insurance Corporation came into existence in the
same year. The Life Insurance Corporation (LIC)
absorbed 154 Indian, 16 non-Indian insurers as also 75
provident societies—245 Indian and foreign insurers in
all. In 1972 with the General Insurance Business
(Nationalisation) Act was passed by the Indian
Parliament, and consequently, General Insurance
business was nationalized with effect from 1 January
1973. 107 insurers were amalgamated and grouped into
four companies, namely National Insurance Company
Ltd., the New India Assurance Company Ltd., the
Oriental Insurance Company Ltd and the United India
Insurance Company Ltd. The General Insurance
Corporation of India was incorporated as a company in
1971 and it commence business on 1 January 1973.
The LIC had monopoly till the late 90s when the
Insurance sector was reopened to the private sector.
Before that, the industry consisted of only two state
insurers: Life Insurers( LIC) and General Insurers (GIC).
GIC had four subsidiary companies. With effect from
December 2000, these subsidiaries have been de-linked
from the parent company and were set up as independent

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insurance companies: Oriental Insurance Company
Limited, New India Assurance Company
Limited, National Insurance Company
Limited and United India Insurance Company.

The insurance industry of India consists of 53 insurance

companies of which 24 are in life insurance business and
29 are non-life insurers. Among the life insurers, Life
Insurance Corporation (LIC) is the sole public sector

Out of 29 non-life insurance companies, there are six

public sector insurers, which include two specialised
insurers namely Agriculture Insurance Company Ltd for
Crop Insurance and Export Credit Guarantee
Corporation of India for Credit Insurance. Moreover,
there are 5 private sector insurers are registered to
underwrite policies exclusively in Health, Personal
Accident and Travel insurance segments. They are Star
Health and Allied Insurance Company Ltd, Apollo
Munich Health Insurance Company Ltd, Max Bupa
Health Insurance Company Ltd, Religare Health
Insurance Company Ltd and Cigna TTK Health
Insurance Company Ltd.

The reinsurance programmes of Indian direct insurance

companies transacting direct insurance business are
supported by Indian Reinsurer/s, Foreign Reinsurer
Branches( FRBs), Llyod's India and the Cross Border
Reinsurers. Other stakeholders in Indian Insurance
market include approved insurance agents, licensed
Corporate Agents, Brokers, Common Service Centres,
Surveyors and Third Party Administrators Servicing
Health Insurance claims.

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Insurance Laws (Amendment) Act, 2015 provides for
enhancement of the Foreign Investment Cap in an Indian
Insurance Company from 26% to an Explicitly
Composite Limit of 49% with the safeguard of Indian
Ownership and Control.

Insurance penetration of India i.e. Premium collected by

Indian insurers is 3.44% of GDP in FY 2015-16. Per
capita premium underwritten i.e. insurance density in
India during FY 2015-16 is US$ 54.7.

Insurance penetration reached 3.4 per cent in FY16 and

is expected to cross 4 per cent in FY17.

In Union Budget 2017, government increased the

coverage from 30 per cent to 40 per cent under Pradhan
Mantri Fasal Bima Yojna.

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Market Size:

Government's policy of insuring the uninsured has

gradually pushed insurance penetration in the country
and proliferation of insurance schemes are expected to
catapult this key ratio beyond 4 per cent mark by the end
of this year, reveals the ASSOCHAM latest paper.
The number of lives covered under Health Insurance
policies during 2015-16 was 36 crore which is
approximately 30 per cent of India's total population.
The number has seen an increase every subsequent year
as 28.80 crores people had the policy in the previous
Premium income of the life insurance segment had
increased 14.04 per cent in FY17 to Rs 4.18 trillion
(US$ 64.92 billion). In August 2017, the Life Insurance
industry reported a 24 per cent growth in overall.


The following are some of the major investments and

developments in the Indian insurance sector.

 Pradhan Mantri Fasal Bima Yojana (PMFBY)

covered 50.9 million farmers in India in 2016-
 India's leading Course Bombay Stock Exchange
(BSE) will set up a joint venture with Ebix Inc
to build a robust insurance distribution network
in the country through a new distribution
exchange platform.
 Revenues of the healthcare sector are projected
to grow by 15 per cent between FY18-20 on the

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back of rise in health insurance coverage
through government-sponsored schemes.

Government Initiatives:

The Government of India has taken a number of

initiatives to boost the insurance industry. Some of them
are as follows:

 Government of India launches Pradhan Mantri

Vaya Vandana Yojana, a pension scheme which
will provide guaranteed 8 per cent annual return
to all the senior citizen above 60 years of age for
a policy tenure of 10 years.
 The Union Cabinet has approved the public
listing of five Government-owned general
insurance companies and reducing the
Government’s stake to 75 per cent from 100 per
cent, which is expected to bring higher levels of
transparency and accountability, and enable the
companies to raise resources from the capital
market to meet their fund requirements.
 The Insurance Regulatory and Development
Authority of India (IRDAI) plans to issue
redesigned initial public offering (IPO)
guidelines for insurance companies in India,
which are to looking to divest equity through the
IPO route.
 IRDAI has allowed insurers to invest up to 10
per cent in additional tier 1 (AT1) bonds that are
issued by banks to augment their tier 1 capital,
in order to expand the pool of eligible investors
for the banks.

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Here are some performance highlights of the Indian
insurance industry.

Life 2015-16 2014-15

Public Private Public Private
Sector Sector Sector Sector

Underwritte 266444. 100499. 239667. 88433.
n (Rs in 21 02 65 49

205.47 61.92 201.71 57.37
Issued (in

Number of
4892 6179 4877 6156

141201. 60565.0
Paid (Rs in 144125 67054
05 5

Claims 761983 114697 755901 121927
(Number of

Claims 2733.4
9690.17 2946.49 9055.18
Amount 9
Paid (Rs in

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Claims 247504 297833 273794 192989
(Number of

Claims 1483.5
2494.03 2303.00 2037.27
Amount 5
Paid (Rs in

98.33 91.48 98.19 89.40
(Figures in
per cent of

(Figures in 99.69 94.65 99.64 91.20
per cent of

No. of
reported 64750 139951 80944 198048
during the

64750 145125 80944 193119
during the

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Resolved 100 103.69 100.00 97.51
(in percent)

Non-Life 2015-16 2014-15

Public Private Public Private
Sector Sector Sector Sector

Underwritten 42549.4 35090.0
47691 39694
(Rs in 8 9

New Policies
Issued (in 671.32 549.44 677.82 504.97

Number of
8414 2389 8207 2200

Net Incurred
38104.2 21764.4 31567.7 19430.4
Claims (Rs
7 4 5 6
in Crores)

Number of
reported 17808 41802 15860 44828
during the

17718 42493 16105 43318
During the

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Bancassurance symbolizes the convergence of banking
and insurance. The term has its origin in France and
involves distribution of insurance products through the
bank’s branch network..Bancassurance is a strategy
adopted by the banks or insurance companies arming to
operate in the financial market in more or less integrated
manner. It is inter linkage of different financial services
as well as the distribution of these products.

Bancassurance or All Finanz is a relationship between a

bank and an insurance company aimed at offering
insurance products or insurance benefits to bank’s

In this partnership bank staffs and tellers become the

point of sale and point of contact for the customer. Bank
staffs are advised and supported by the insurance
company through the wholesale product information,
marketing campaigns and sales training. The bank and
the insurance company share the commission.

In a concrete terms, bancassurance describes a package

of financial services that can fulfill the both the banking
and insurance needs at the same time. It takes various
forms in various countries depending upon the
demography and economic climate of the country.
Demographic profile of the country decides the kind of
products bancassurance shall be dealing in
with.Economic situation will determine the trend in
terms of turnover,market share etc.

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Research Methodology
Research is being undertaken within most of the
professions. More than a set of skill, research is the way
of thinking, examining critically the various aspects of
day to day professional work, understanding and
formulating guiding principles and govern a particular
procedure ,developing and testing the new theories for
the enhancement of the practice. It is a habit of
questioning what we do and the systematic examination
of the observed information to find the answers, with a
view to instituting the appropriate changes for the
effective professional service.

Research is an art of scientific investigation. In other

words, research is a scientific and systematic search for
pertinent information on a specific topic.

The logic behind taking the research methodology into a

consideration is that one can have knowledge about the
method and procedure adopted for the achievements of
objectives of the project. With the adoption of this others
can evaluate the results also.Its main aim is to keep the
researchers on the right track.

Sources of Data:

The present study is basically based on the secondary

data.The secondary data has been collected from the
relevant annual reports and publication of RBI and
IRDA.Added to this information from several

36 | P a g e
newspapers, magazines, journals, books and the
published documents have also been collected and

Objectives of the study:

Objective is needed at each and every step of our life.
Without objective we cannot proceed ahead to achieve
something. Therefore, a clear objective should be there.

The project undertaken by me as a part of Master of

Business Administration (Risk& Insurance)course is an
effort made by me to study the “Bancassurance in

 To understand the scope and prospect of

Bancassurance in India.
 To understand the rules and regulations imposed
on the Bancassurance companies in India.
 To find out the benefits of bancassurance to the
 To understand the various tie ups of the banks
with the various insurance companies in India.
 To study the RBI &IRDA guidelines on the
 To evaluate the future prospect of the
bancassurance through the past records.

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Scope of Study:

Bancassurance is a very fast growing industry so

the scope of this industry is very bright and
high.In thev recent couple of years
bancassurance market share has increased and is
still on a growing trend.Bancassurance will have
a significant market share in the recent years.

The scope for bancassurance as a feasible source

of sustainable income to the banking sector is
explored by exploiting the synergy in the context
of India having the largest banking network on
the one hand and lowers insurance penetration
and insurance density on the other hand.While
analyzing the present trends of banks handling
the insurance products.,it also highlights some of
the likely issues in general as well as specific
from the point of regulator and supervisor.

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Significance of the Study:

As with originally ,there are degrees of

significance.At the highest level,significance is a
function of the field’s long term interest in the
problem,the difficulty involved in solving the
problem,the influence of the results on the
further developments in the field,as well as the
degree to which the results affect other
fields,disciplines and even the society as a
The faculty who participated in the study
described a significant contribution as something
that is useful and will have an impact and is
therefore publishable in the top tier journals
It offers a very important breakthrough
at the emperical, conceptual, theoretical
It is useful and will have an impact over
the reader’s mind.
It causes those inside and possibly those
outside the community to see the things
It influences the conversation research
and thinking.
It has the implications for and advances
the field, the discipline, other
disciplines, society and nations as a

39 | P a g e
Limitations of the Study:

1. The data and information were not easily

available scattered and took a lot of time to
compile them as per the requirement.

2. Since the project is based on the secondary data

,therefore its significance and relevance of the
data is doubtful.

3. The time period of the study was limited so all

the aspects of bancassurance could not be
studied thoroughly.

4. Bancassurance in India is in its budding stage so

the prediction could not be made on their bases
as it may vary too much in a short period.

5. Lack of knowledge could be another limitation

,this project has been undertaken as a learning

40 | P a g e


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Meaning and Concept of Bancassurance:
Bancassurance is the marketing of the insurance
products by the banks. Banks ,apart from their regular
products of deposits ,advances, loans, investments etc
are also engaged in the selling of the insurance products
both life and non life insurance in order to increase their
fee based income and to leverage their inherent

The philosophy behind the Bancassurance is to combine

the manufacturing capability and selling culture of
insurance companies with the distribution network and
large receptive client base of banks.In other
words,Bancassurance aims at manipulating the inter
connectivity between the insurance companies and the

Bancassurance is a French term and has its origin in

France and soon became a success story even in other
countries of Europe.In India number of insurers have
already tied up with the banks and some banks have
already flagged off the bancassurance through selected
products.Bancassurance is the selling of insurance and
banking products through the same channel most
commonly through the bank branches.Selling insurance
means distribution of insurance and other financial
products through banks.

It is a new concept to the Indian market,but it is very

widely used in the Western and the developed
countries.It is profitable to both the banks and the
insurance companies as it has the very bright future

42 | P a g e
prospects. The share of premium collected by the banks
is increasing in a decent manner from the time it was
introduced to the Indian market. In India Bancassurance
is guided by IRDA and RBI. All banks and insurance
company have to meet a particular requirement in order
to get into the bancassurance business.

Bancassurance describes a package of financial services

that can fulfill both the banking and insurance needs at
the same time.It takes various forms in various countries
depending upon the demography ,economic and
legislative climate of the country.

The banking business is generating more profit by more

premium collected by them and they also receives
commission and can earn additional revenue by selling
the insurance products.It is even profitable for the
insurance company as they receives more and more sales
and higher customer base for the company.

Thus in all,Bancassurance has proved to be a boom in

whole banking and insurance business.

The banking and insurance industries have changed

rapidly in the changing and challenging economic
environment throughout the world.In this competitive
and liberalized environment everyone is trying to do
better than others and consequently survival of the fittest
has come into the effect.The RBI being the regulatory
authority of the banking system recognizing the need for
banks to diversify their activities permitted them to enter
into the insurance sector through the bancassurance

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This has given rise to a new form of business
wherein two big financial institution have come
together and have integrated all their strengths
and efforts and have created a new means of
marketing and promoting their products and
services.On one hand it is the banking sector
which is very competitive and on the other hand
it is an insurance sector which has the potential
for the growth,and when these both join together
it gives birth to the Bancassurance.

“Bank Insurance Model (BIM)” also sometimes

known as the “Bancassurance”is a term which is
used to describe the partnership or the
relationship between the bank and the insurance
company whereby the insurance company uses
the bank sales channel in order to sell the
insurance products.BIM allows the insurance
company to maintain the smaller direct sales
terms as their products are sold through the bank
to bank customer by bank staff.

BIM differs from classic or traditional insurance

model.In that TIM insurance companies tends to
have larger insurance sales teams and generally
work with the brokers and third party agents.

An additional approach Hybrid Insurance Model

,is a mix between BIM &TIM .HIM insurance
companies may have a sales force ,may use
brokers and agents and may have a partnership
with the bank.

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Bancassurance can be an important source of
revenue.With the increased competition and squeezing
of interest rates ,profits are likely to be under
pressure.Fee based income can be increased through
hawking of risk products.Bancassurance if taken in a
right spirit and implemented properly can be a win win
situation for all the participants.

Since 1999,with the end of the monopoly of the life

insurance sales by the former state owned banks,the
private sector banks have led the bancassurance
revolution in India.Deregulation also permitted the entry
of the foreign banks and insurers into the real life

The result is an increase in life insurance penetration to

2.4%.Premium income soared 41% in fiscal 2009 and
market sources predict that the overall insurance market
will increase five fold to US$60 billion equivalent by

As in other emerging markets banks are relatively

inexpensive channel which benefits from the confidence
of retail savers in their local bank and the resulting
willingness to buy more financial products from that
provider.Typically a bancassurance agent is placed in the
relevant bank branch.

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Origin of Bancassurance:

Bancassurance has grown in different places in different

forms based on the demographic, economic and
legislative condition of the country. The term
bancassurance concept originated in France .While has
soon became a success story even in other countries of
Europe .Bancassurance has proved to be an effective
distribution channel in number of countries in
Europe,Asia,Australia and Latin America.

Bancassurance was not very much popular in USA as

the Stegall Act 1933 prevented the banks of USA from
entering into alliance with the financial services
providers.Therefore,putting a ban on the
bancassurance.As a result of this,life insurance was
primarily sold by the insurance agents who focused
mainly on the wealthier class of people,which lead to the
majority of American middle class households

With US govt ,it was recently legalized by repealing the

act after the passage of Grammleach Bliley Act 1999,the
concept of bancassurance started gaining the momentum
in USA also.But revenues have been modest and flat in
recent years,and the most insurance sales in US banks
are for the mortgage insurance,life insurance or the
property insurance related to loans.But China recently
allowed the banks to buy insurers and vis a vis
,stimulating the bancassurance product and some major
global insurers in china have seen the bancassurance

46 | P a g e
product greatly expand sales to the individuals across the
several product lines. Coming to Asia, it has been
estimated that the bancassurance would contribute
almost 16% of the life premium in the Asian markets in
the year 2006 primarily due to the growth expected in
China & India. Middle East has probably the lowest
penetration of the bancassurance products.

Why should banks enter insurance?

There are several reasons why the banks should
seriously consider Bancassurance the most important of
which is the increased Return on Assets(ROA).One of
the best ways to increase ROA, assuming a constant
asset base is through fee income. Banks that build fee
income can cover more of their operating expenses, and
one way to build the fee income is through the sale of
the insurance products.

By leveraging their strengths and finding ways to

overcome their weaknesses, banks could change the face
of insurance distribution. Sale of insurance products
through banks meet an important set of consumer needs.

Another advantage banks have over traditional insurance

distributors is the lower cost per sales made possible by
their sizeable loyal customer base. Banks also enjoy
significant brand awareness within their geographic
regions again providing for a lower per head cost when
advertising through print radio television .

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Other bank strengths are their marketing and processing
capabilities. Banks have an extensive experience in
marketing to both the existing customers and non
customers. They also have an access to multiple
communication channels. Banks proficiency in using the
technology has resulted in the improvements in the
transaction processing and the customer service.

Need for Bancassurance:

The growth of Bancassurance as a distribution channel

can be prescribed as:

 Conducive environment:Progressive dismantling

of laws relating to undertaking of insurance
businesses by the banks, increasing use of
electronic channels and automation,growing
needs for private retrirement plans to complete
the public pensions,the concern for providing
total financial to the customers etc have paved
the way for the bancassurance.

 Cost Effectiveness:Insurers look to the

bancassurance as an alternative cost ,effective
mode of distribution as against the costly agency
services.It is estimated that 50% of the insurers
cost structure is directly or indirectly related to
the distribution.

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 Fee based Income:A bank expects to increase its
fee based income and overall productivity by
leveraging its branch network,brand image and
client base by optimally using its assets or
infrastructure and by positioning itself as an one
stop shop with the value added services for its
customers ,thereby increasing the customer
loyalty and retention. Bancassurance enables a
bank to satisfy the risk protection needs of its
clients without assuming the underwriting risk.

 Fund management:Life insurance is a saving

market.It is one of the method to increase the
deposits of the banks.Both the life and non life
insurance business provide the additional flow
of funds besides the fee base income to the
banks,through the same channel of distribution
and with the same people.

 Innovations and efficiency:Increased

convergence of banking and insurance would
lead to melding of their corporate cultures,skill
and innovating the marketing of financial

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Advantages of Bancassurance
Advantange for the banks:

 Revenue diversification
 Satisfaction of more financial needs under the
same roof.
 Customer retention-Increase in customer loyalty
 More profitable resources utilization
 Enriched customer environment
 Establish sales oriented culture
 Advantage for the insurance companies
 Revenue and channel diversification
 Quality customer access
 Increase in volume and profit
 Improved brand equity
 The insurance company can establish itself more
quickly in a new market ,using a local existing
bank channel.

Advantage for the consumers

 Enhanced conveniency
 One stop shop for all financial needs
 Innovative and better products range
 More credible solutions

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Disadvantages of bancassurance:

 Data management of an individual customer’s

identity and contact details may result in the
insurance company utilizing the details to
market their products, thus compromising on
data security.

 There is a possibility of the conflict of interest

between the other products of bank and
insurance policies (like money back policy).
This could confuse the customer regarding
where he has to invest.

 Better approach and services provided by banks

to the customer is a hope rather than a fact. This
is because many banks in India are known for
their bad customer service and this fact turns
worse when they are responsible to sell
insurance products. Work nature to market
insurance products requires submissive attitude,
which is a point that has to be worked on by
many banks in India.

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Determinants of Bancassurance:
Bancassurance has achieved remarkable success in some
markets.In Europe,it is not uncommon to find over half
of the life insurance business being transacted by the

The following will summarise the determinants of

bancassurance from the perspective of
stakeholders:banks,insurer,consumers and regulators.


Retail banks earn their income from the spread between

the rates they charge on lending and those they pay for
deposits .Growing market competition
however,weighing down heavily on the banks.As a
result ,banks are increasingly looking to commissions
and fees from selling the insurance products.Some banks
are eyeing bancassurance as a step to the formation of
the financial supermarkets where one institution serves
all 86 financial needs of its consumers.A potential
benefit is the reduction in the volatility of return on
equity due to the lack of synchronization between the
insurance and banking profitability cycle.

From the perspective of banks,bancassurance is

attractive because banks can secure an additional and
more stable stream of income through diversification
into insurance and reduce their reliance on interest
spreads as a major source of income.Leverage on their
extensive customer bases;sell a whole range of financial
services to clients and increase customer relation.Reduce

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risk based capital requirement for the same level of
revenue.Work towards the provision of integrated
financial services tailored to the life cycle of the
customers.Access funds that are otherwise kept with the
life insurers,who sometimes benefits from tax


The benefits to the insurers are equally convincing.The

ability to tap into banks huge customer bases is a major
incentives. The extensive customer base possessed by
the bank is considered to be ideal for the distribution of
mass market products. On the other hand, insurers can
make use of wide reach of bank customers to categorise
potential clients in detail according to their needs and
values.With the increasing sophistication on
bancassurance operations some insurers can focus on the
high net worth segment, which offers greater potential
for the wealth management business.

 In a nutshell,insurers are attracted to the

bancassurance because they can:
 Tap into huge customer base of banks.
 Reduce their reliance on traditional agents by
making use of various channels owned by the
 Share services with banks.
 Develop new financial products more effectively
and efficiently in collaboration with the banks

53 | P a g e

Unlike with banks and insurers, where benefits of

bancassurance will have to be weighed against the
business risk,the positive impact on consumers are
unequivocal. Part of the lowering of distribution cost
will be passed onto the clients in a form of lower
premium rates.

In addition,it is likely that new products will be

developed to better suit the client needs,which otherwise
may not be available if the banks and insurers worked
independently.The convenience offered by the
bancassurance should also increase customer satisfaction
for instance,when it is possible to pay the premium as
well as to withdraw and repay the cash loans backed by
the life insurance policies through bank ATM.


Bancassurance poses major challenges to the

regulators.The ability of financial institutions to
diversify into other sectors should help to lower the level
of latent systematic risk.Banks will benefit from lower
income volatility while insurers could potentially obtain
additional capital to bolster their solvency level.

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Business models across the world

'Integrated models' is insurance activity deeply

integrated with bank's processes. Premium is usually
collected by the bank, usually direct debit from
customer's account held in that bank. New business data
entry is done in the bank branches and workflows
between the bank and the insurance companies are
automated. In most cases, asset management is done by
the bank’s asset management subsidiary.
Insurance products are distributed by branch staff, which
is sometimes supported by specialised insurance advisers
for more sophisticated products or for certain types of
clients. Life insurance products are fully integrated in the
bank’s range of savings and investment products and the
trend is for branch staff to sell a growing number of
insurance products that are becoming farther removed
from its core business, e.g., protection, health, or non-
life products.
Products are mainly medium- and long-term tax-
advantaged investment products. They are designed
specifically for bancassurance channels to meet the
needs of branch advisers in terms of simplicity and
similarity with banking products. In particular, these
products often have a low-risk insurance component.
Bank branches receive commissions for the sale of life
insurance products. Part of the commissions can be paid
to branch staff as commissions or bonuses based on the
achievement of sales targets.

'Non-integrated Models' – The sale of life insurance

products by branch staff has been limited by regulatory
constraints since most investment-based products can

55 | P a g e
only be sold by authorised financial advisers who have
obtained a minimum qualification.
Banks have therefore set up networks of financial
advisers authorised to sell regulated insurance
products.They usually operate as tied agents and sell
exclusively the products manufactured by the bank’s in-
house insurance company or its third-party provider(s).
A proactive approach is used to generate leads for the
financial advisers from the customer base, including
through mailings and telesales. There is increasing focus
on developing relationships with the large number of
customers who rarely or never visit a bank branch.
Financial planners are typically employed by the bank or
building society rather than the life company and usually
receive a basic salary plus a bonus element based on a
combination of factors including sales volumes,
persistency, and product mix.
Following the reform of the polarisation regime, banks
will have the possibility to become multi-tied
distributors offering a range of products from different
providers. This has the potential to strengthen the
position of bancassurers by allowing them to meet their
customers’ needs.

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Structural Classification

a) Referral Model:
Banks intending not to take risk could adopt ‘referral
model’ wherein they purely part with their client data
base for business lead for commission. The actual
transaction with the prospective client in referral model
is done by the staff of the insurance company either at
the premise of the bank or somewhere else. Referral
model is nothing but a simple arrangement, wherein the
bank, while scheming access to the clients data base,
parts with only the business leads to the agents/ sales
staff of insurance company for a ‘referral fee’ or
commission for all business lead that was passed on. In
fact a number of banks in India have already resorted to
this approach to begin with. This model would be
suitable for almost all types of banks including the RRBs
/cooperative banks and even cooperative societies both
in rural and urban. There is larger scope in the medium
term for this model. For, instance banks to begin with
resorts to this model and then move on to the other

 Here, Bank will give office space to the insurance

company in its branches.
 The insurance staff will sit in the bank branch and
sell its products to bank customers.
 Bank staff doesn’t participate in selling.
 Bank faces no risk. Insurance company pays fixed-
fees for using the office space.

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 Pro: Customer directly talks with insurance
staff=less chance of bank staff misguiding/mis-
selling policies to them.
 Con: In other two models, bank can make more

b) Corporate Agency:

The other form of non-risk participatory distribution

channel is that of ‘corporate agency’, wherein the bank
staff is trained to appraise and sell the products to the
customers. Here the bank as an institution acts as
corporate agent for the insurance products for a fee/
commission. This seems to be more practical and
appropriate for most of the mid-sized banks in India as
also the rate of commission would be reasonably higher
than the referral arrangement. This, However, is prone to
reputational risk of the marketing bank. There are also
realistic difficulties in the form of professional
knowledge about the insurance products. Besides,
confrontation from staff to handle totally new
service/product could not be ruled out. This could,
however, be overcome by severe training to chosen staff
packaged with proper incentives in the banks coupled
with selling of simple insurance products in the initial
stage. This model is best suitable for majority of banks
including some major urban cooperative banks because
neither there is sharing of risk nor does it involve huge
investment in the form of infrastructure and yet could be
a good source of income. Bajaj Allianz stated to have
established a growth of 325 per cent during April-
September 2004, mainly due to bancassurance strategy

58 | P a g e
and around 40% of its new premiums business
(Economic Times, October 8, 2004). Interestingly, even
in a developed country like US, banks stated to have
preferred to focus on the distribution channel similar to
corporate agency rather than underwriting business.
Several major US banks including Wells Fargo,
Wachovia and BB &T built a great distribution network
by acquiring insurance brokerage business. This model
of bancassurance worked well in the US, because
consumers generally prefer to purchase policies through
broker banks that offer a wide variety of products from
competing insurers

Insurance as fully integrated financial

service/joint venture:

Apart from the above two,the fully integrated financial

services involves much more comprehensive
relationship between the insurer and bank,where the
bank functions as fully universal in its operation and
selling of insurance products is just one more function
within.This includes the banks having wholly owned
insurance subsidiaries with or without the foreign
participation.The great advantage of this strategy being
that the bank could make use of its full potential to reap
the benefit of synergy and therefore the economy of
scope. This may be suitable to relatively larger banks
with sound financials and has better infrastructure.As per
the regulation of insurance sector the foreign insurance
company could enter the Indian insurance market only in
the form of joint venture. Therefore,this type of

59 | P a g e
bancassurance seems to have emerged out of necessity in

Product based Classification:

 Stand alone insurance product:

In this case bancassurance involves marketing of the

insurance product through either referral arrangement or
corporate agency without mixing the insurance product
with any of the banks own product or services. Insurance
is sold as one more item in the menu of products offer to
the bank customer.

 Blend of insurance with bank products:

This method aims at blending of insurance

products as a value addition while promoting the
bank own product. Thus banks could sell the
insurance products without any additional
efforts. In most of the banks giving insurance
cover at a nominal premium fee without explicit
premium act as an added attraction to sell the
banks own product. Similarly the home loans etc
have also been packaged with the insurance
cover as an additional incentive.

 Bank referrals:
There is also another method called ‘Bank
Referral’. Here the bank do not issue the policies
they only give the database to the insurance
companies. The companies issue the policies and
pay the commision to them. This is called

60 | P a g e
referral basis. In this method also there is a win
win situation everywhere.

Bancassurance Strategy:

Brand Equity: The strategy should leverage the bank’s

brand equity with the consumers.Consumers throughout
the world rate bankers high than the insurance agents in
terms of such criteria as objectivity of advice and
product knowledge.A rationalized bancassurance
strategy will build on the superior brand equity of banks
by integrating insurance into banks products portfolio
and distribution infrastructure.

Distribution:The distribution model should accomplish

the following objectives:

It should cater to all segments of the banking population.

It should work as a single shop for all the financial

requirements for the bank customers.

.It should effectively utilize the existing branch banking


It should take advantage of the multiple sales

opportunities afforded by the bank’s other distribution

One of the key economic advantage of the

bancassurance is the savings achieved through the
efficient utilization of the bank’s existing distribution

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Technology: Bancassurance should plan a technological
infrastructure that will exploit the customer information
found in the bank’s database to uncover sales
opportunities .Bancassurance should use the technology
to simplify the insurance purchases as much as possible
,thereby making the purchase an easier.Buying insurance
in a traditional way means dealing with the agents and
the complications of the underwriting process ,which the
bancassurance can eliminate.

Culture: An effective bancassurance strategy

acknowledges the fundamental cultural conflicts
between the bank and the insurance company by
aligning the bank’s interests with those of the insurance
company.Without the bank’s total commitment to the
insurance strategy ,any bancassurance program is
doomed to fail.One of the more effective ways to
achieve this commitment is for the bank to have an
equity interest in the insurance company.

Distribution channels in Bancassurance:

Traditionally,insurance products have been promoted
and sold principally through the agency system in most
countries.With the new developments in the consumer’s
behavior,evolution of technology new distribution
channels have been developed successfully and very
rapidly in the recent years.Bancassurers make use of
various distribution channels as:

Career Agents:

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They are full time commissioned sales personnel holding
an agency contract.They are generally considered to be
an independent personnel.Consequently,an insurance
company can exercise control only over the activities of
the agents which are specified in his contract.Despite the
limitation on control,career agents with a suitable
training supervision can be highly productive and cost

Many bancassurers however avoid this channel believing

that the agents might oversell out of their interest .Such
problems with the career agents usually arise,not due to
the nature of this channel,but rather due to the use of
improperly designed remuneration or incentives

Special Advisers:

They are highly trained employees usually belonging to

the insurance partner,who distributes the insurance
products to the bank’s corporate clients.Banks refers
complex insurance requirements to these advisors.The
clients mostly includes affluent population who requires
personalized and high quality service.Usually special
advisors are paid on a salary basis and they receive
incentives compensation based on their sales.

Platform Bankers:

They are the bank employees who spot the leads in the
banks and gently suggests the customers to walk over
and speak with appropriate representatives within the
bank .They may be a teller or a personnel loan assistant

63 | P a g e
and the representative being referred to may be a trained
bank employee or a representative from the partner
insurance company.

Platform bankers can usually sell simple

products.However the time which they can devote to the
insurance sales is limited.A further restriction on the
effectiveness of the bank employees in generating the
insurance business is that they have a limited target
market,i.e.those customers who actually visits the branch
during the opening hours.

Direct Response:

In this channel no salesperson visits the custyomer to

induce the sale and no face to face contact between the
customer and the seller occurs.The customer purchases
the product directly from the bancassurer by responding
to the company’s advertisement,mailing etc.This channel
can be used for simple packaged product which can be
easily understood by the customer without any


Internet bankingis securely established as an effective

and profitable basis for conducting the banking
operations.The reasonable expectation is that the
personal banking services will be delivered by the
internet banking services.Bancassurers can also feel
confident that the internet banking will also prove an
efficient vehicle for cross selling of insurance savings
and protection products.It seems likely that a growing

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proportion of the affluent population ,everyone’s target
market will find banks with households name brands and
proven skills in E-Business a very acceptable source of
non banking products.


Banks can open or acquire an E Brokerage arm and sell

the insurance products from multiple insurers.The
advantage of this medium is the scale of operation,strong
brands,easy distribution and excellent strategy.

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Organizational Structure Of
Bancassurance Companies:




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Bancassurance in India:

The Indian insurance sector has undergone a big change

in the last decade,ever since the sector was opened for
the private players. Traditionally,the insurance products
are sold only through the individual agents and they
account for a major chunk of the business in a retail
segment.With the opening up of this sector to the private
players competition has become more intense and the
public sector LIC has been challenged with a flood of
new products and new means of marketing.Insurance
industry in India has been progressing at a rapid since
opening up of the sector to the private companies in
2000.The size of the country,diverse set of people makes
the insurance selling in India a very difficult
proposition.The insurance companies require immense
distribution strength and tremendous manpower to reach
out to such huge customer base.This distribution will
undergo a sea change as various insurance companies
are proposing to bring the insurance products into the
lives of the common man by making them available at
the most basic financial point,the local bank branch
through bancassurance.

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Prospect Of Bancassurance In India:

In India the concept of bancassurance is very bright

because of the following reasons:

 Indian economy is growing at 9% of the growth

 Huge inflow of FDI.
 Huge banking infrastructure across the
urban,semi urban and rural India.
 Increasing PPP.
 Explanation of middle income class Indians.

In 2007, India has 88 SCB’s -28 public sector banks,29

private banks and 31 foreign banks. Altogether they
have a combined network of over 53000 branches. There
are 70324 bank offices in india and around 16000 people
are served by each bank office. Its a huge banking
infrastructure and among the best banking network in the
world. Bancassurance if taken in a right spirit and also
implemented properly can be a win win situation for all
the participants.

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Reasons For Growing Bancassurance In
The opening up of the insurance industry to private
sector participants in December 1999 has led to the entry
of 20 new players with 12 in life insurance sectors and 8
in non life insurance sectors.Almost without exception
these companies are seeking to utilize the multiple
distribution channels.In other Asian markets
bancassurance makes a significant headway in recent
times.Some of the following are the reasons:

 Life insurance premium represents 71% of the

world insurance premium and as the life
insurance is basically a saving market ,so it is
one of the method to increase the deposits of
 In non life insurance business ,banks are looking
to provide the additional flow of revenues from
the same customers through the same channel of
distribution and with the same people.
 One of the most important reasons of
considering bancassurance by the banks is the
increased return on assets,and one of the best
way to increase return on assets ,assuming
constant asset base is through fee income.
 It is believed that the prospects for increased
consolidation between banking and insurance is
more likely dominated and derived by the
marketing innovations that are likely to follow
from financial service modernization.

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 Improvements in transaction processing and
customer service.
 Other bank strengths are their marketing and
processing capabilities.Banks have extensive
experience in marketing to both the existing and
non existing customers.They also have an access
to multiple communication channels .
 By successfully mining their customer database
,leveraging their reputation and distribution
system to make appointments and utilizing the
sales techniques .
 Cost per sales lead made possible by their
sizeable loyal customer base.Banks also enjoy
significant brand awareness within their
geographical regions,again providing for lower
per lead cost when advertising through
print,radio etc.Banks that make the most of these
advantage are able to penetrate their customer
base and market for the above average market
 Insurer have much to gain from marketing
through banks.Personal line carriers have found
it difficult to grow using the traditional agency
system .Over the last decade,life agents have
sold fewer larger policies to more upscale client

71 | P a g e
Data Analysis And Interpretation:
Analysis based on the impact of bancassurance
on the banking business in India:

The performance of both banks and insurance

companies interdependent on each other.The following
study shows the impact of bancassurance on the overall
financial performance of banks in India.For this
purpose,the researcher has selected some banks in which
the figures of net worth,,deposits,advances,interest
income etc reveal that the bancassurance has paved the
way for the banks to grow.Although there are number of
other factors which contributed to the growth of
banks,but the bancassurance is one of factors.

Industrial Credit And Investment Corporation

Of India (ICICI) Bank:

ICICI Bank was established by the Industrial Credit And

Investment Corporation Of India,an Indian financial
institution .It was formed in 1955 as a joint venture of
the World Bank,India’s public sector banks and public
sector insurance companies to provide project financing
to the Indian industry.

Under the bancassurance business,ICICI Bank has

subsidiary named ICICI Prudential Life Insurance Co.
Ltd. And ICICI Lombard General Insurance

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Company.ICICI Prudential Life Insurance company
limited is a joint venture between ICICI Bank and
Prudential,a leading international financial service group
whose headquarters is in UK .It was established in
December 2000 after receiving an approval from IRDA
.ICICI Lombard General Insurance company limited was
established in August 2001.

Financial Position Of ICICI Bank and Income

Derived From Its Bancassurance Business:

Net Advances Deposits Net Net

Worth Interest Profit

2008- 49,883 2,18,311 218,348 8,366 3,758

2009- 51,618 1,81,205 2,02,017 8144 4,025
2010- 55,091 2,16,366 2,25,602 9017 5,151
2011- 60,405 2,53,723 2,55,500 10,734 6,465
2012- 66,706 2,90,249 2,92,614 13,866 8,325

The above table shows that the net worth of ICICI Bank
for year 2008-09 was 49,883 crores and a growth of
3.48% for a year ended 2009-10.It has grown from
51,618 crores in 2009-10 to Rs 55,091 crores in 2010-11

73 | P a g e increase of 6.73%.There was a growth of 9.65% in
year 2011-12.

Advances decreased by (17%) and earned Rs 1,81,206

crores for year 2009-10 from Rs 2,18,311 crores of
2008-09.The bank registered a growth of 11.67% from
Rs 1,81,205 of 2009-10 to 2,16,366 crores of 2010-11
and a growth of 17.27% from 2010-11 to 2011-12.

ICICI Bank’s total deposits decreased by 7.48% and

earned Rs 2,02,017 crores for year 2009-10 over PY
2008-09.It has grown by 11.67% to reach Rs 2,55,602
crores in year 2010-11.ICICI Bank’s total deposits
amounted to Rs 2,92,614 crores showing an addition of
Rs 37,114 crores .

Total net interest income of ICICI Bank showed that the

growth rate has decreased by (3.02%) from Rs 8,366
crores in year 2008-09 to Rs 8114 crores in year 2009-

Net profit increased registering a strong growth by 7.10

% to Rs 4025 crores in 2009-10 from Rs 3758 crores in
the previous year 2008-09.It increased by 27.98% from
Rs 4025 crores in 2009-10 to Rs 5151 crores in 2010-11.

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IDBI was established on 1st july 1964 under an Act of
Parliament as a wholly owned subsidiary of the RBI. On
16 Feb 1976 the ownership IDBI was transferred to the
government of India and it was made the principle
financial institution for co-ordinating the activities of the
institutions engaged in financing, promoting and
developing the industry in the country.

IDBI bank offers the life insurance solutions to suit

various customers through IDBI Federal Life Insurance
Company Ltd. It was found on March 2008.

Net Advances Deposits Net Net

worth Interest profit
09 9,564 1,03,444 1,12,401 1,326 859
10 10,293 1,38,202 1,67,667 2,267 1,031
11 14,570 1,57,098 1,80,487 4,329 1,650
12 19,391 1.80,572 2,10,493 4,545 2,032
13 21,236 1,96,306 2,27,116 5,373 1,882

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Regulations By RBI:
Following the issuance of Govt Of India notification
dated specifying “Insurance” as a permissible form of
business that could be undertaken by the banks u/s 6(1)
(o) of the Banking Regulation Act 1949; RBI issued the
guidelines on the Insurance business for the banks.

a.Any scheduled commercial bank would be permitted to

undertake the insurance business as agent of the
insurance companies on a fee basis without any risk

b.Banks which satisfy the eligibility criteria given below

will be permitted to set up a joint venture company for
undertaking the insurance business with a risk
participation.The maximum equity contribution such a
bank can hold in a joint venture company will normally
be 50% of the paid up capital of the insurance company.

The eligibility criteria for Joint Venture Participant are

as under:-

1.The net worth of the bank should not be less than Rs

500 crore.

2.The CRAR of the bank should not be less than 10%.

3.The level of non performing assets should be


4.The bank should have net profit for the last 3

consecutive years.

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5.The track record of the performance of the subsidiaries
if any of the concerned bank should be satisfactory.

c.In cases where foreign partner contributes 26% of the

equity with the approval of the IRDA/FIPB, more than
one public or private sector bank may be allowed to
participate in the equity of the insurance joint venture.As
such participants will also assume the insurance risk
only those banks which satisfy the criteria given above
would be eligible.

d.A subsidiary of bank or of another bank will not

normally be allowed to join the insurance company on
the risk participation basis.

e.Banks which are not eligible for the joint venture

participant as mentioned above can make investment
upto 10%of the net worth of the bank or Rs 50 crore
,whichever is lower,in the insurance company for
providing the infrastructure and service support.Such
participation shall be treated as an investment and should
be without any contingent liability for the bank.

1.The CRAR of the bank should not be less than 10%.

2.The level of NPA should be reasonable.

3.The bank should have a net profit for the last 3

consecutive years.

f.Holding of equity by a promoter bank in an insurance

company or participation in any form in the insurance
business will be subject to the compliance with any rules
and regulations laid down by the CG/IRDA.

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g.Latest audited balance sheet will be considered for
reckoning the eligibility criteria.

h.The Reserve Bank Of India has given certain

guidelines for the banks to enter into the insurance
sector.These are as follows:-

1.Any commercial bank will be allowed to undertake the

insurance business as the agent of insurance companies
and this will be on fee basis with no risk participation.

2.The second guideline given by RBI is that the joint

venture will be allowed for the financial strong banks
wishing to undertake the insurance business with the risk

3.The third guideline is for the banks which are not

eligible for this joint venture option ,an investment

A.Upto 10% of the net worth of the bank or,

B.Rs 50 crore,whichever is lower.

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Regulations By IRDA

The Insurance Regulatory Development And Authority

has given certain guidelines for the bancassurance which
are as follows:

Chief Insurance Executive:

Each bank that sells the insurance must have a Chief

Insurance Executive who will handle all the insurance
matters and activities.

Mandatory Training:

All people involved in selling the insurance should

undergo the mandatory training at an institute authorized
by IRDA and has to pass the examination conducted b y
the authority.

Corporate Agents:

Commercial banks including the cooperative banks and

RRB may become corporate agents for one insurance

Issues For Regulation:

Certain regulatory barriers have slowed the development

of bancassurance in India which have only recently been
cleared with the passage of the insurance amendment act
2002.Prior it was clearly an impractical necessity and

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had held up the implementation of bancassurance in the

Training and Examination Requirements:

Upon the corporate insurance executive within the

corporate agency ,this barrier has effectively been
removed.Another regulatory change is published in the
recent publication of IRDA regulation relating to the
licensing of the corporate agents.

(2)Specified person to satisfy the training and

examination: According to the new regulation of IRDA
only the specific persons have to satisfy the training and
examination requirement as an insurance agent.

Restrictive Feature:

A restrictive feature of Bancassurance Regulation is that:

A. They appear to constrain the corporate agents to

receive only commission,the profit sharing arrangements
would seem to be ruled out.

B. The products sold through bank channels or networks

can be highly profitable and so,such agreement with
banks is highly beneficial for the banks.

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Insurance Regulatory And Development Authority
(Licensing Of Bancassurance Agents)

In exercise of the powers so conferred by sub section(2)

of section 114 A of the Insurance Act,1938 read with
sections 14 and 26 of IRDA Act 1999,the authority ,in
consultation with the Insurance Advisory Committee
hereby makes the following regulations namely the:

A.) Short Title And Commencements:

1. These regulations may be called the IRDA(Licensing

Of Bancassurance Agents) regulations ,2002.

2. They shall come into force on the date of their

publication in the official gazette .However,the banks
licensed under the corporate agency under IRDA
(Licensing Of Corporate Agents)Regulations,2002 shall
govern under these regulation on the expiry of the
license or on the termination of the existing license.

B.) Definitions:

In these regulations :-

1.Act means The Insurance Act,1938(4 of 1938)

2.Authority” means The Insurance Regulatory And

Development Authority established under the provisions
of section 3 of the IRDA Act 1999.

3.Applicant” means any institution including Non

Banking Finance Companies licensed under Banking

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Regulation Act 1949 to accept the deposits from the

4.Bancassurance Agent” means an applicant specified

in clause (iii) and licensed to act as such under these

5.Certification” means the process by which a Specified

Person or Chief Bancassurance Executive of the
bancassurance agent who has passed the required
examination ,is issued a certificate entitling him to
solicit and procure the insurance business on behalf of
the Bancassurance Agent.

6.Chief Bancassurance Agent” means an officer of the

Bancassurance Agent so nominated by its Board Of
Directors who possess the requisite qualification and
who have passed such an examination as required under
clause (e) and (f) of section 42 of the act.

7.Specified Person” means one or more of its officers or

other employees so designated by the Bancassurance
Agent who has passed the required
examination,certification and who is responsible for
soliciting and procuring the insurance business on behalf
of the Bancassurance Agent.

C.) Issue or Renewal Of License:

(1)An applicant desiring to obtain a license to act as a

bancassurance agent shall make an application to the
authority in form IRDA –BA-A_1 alongwith the fee of
rs 500 to the authority.

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(2) While considering the applicant ,Authority shall take
into account all matters affecting distribution of the
insurance products by the applicant or its promoters.In
particular and without prejudice to the generality ,the
authority shall consider the following matters for grant
of license to the applicant namely-

Record of performance of applicant ,company in the

field of business the applicant is engaged in ;

Record of performance of the directors and person in

management of the applicant,more particularly the Chief
Bancassurance Insurance Executive of the applicant

(3) The Authority after making such inquiry as it deems

fit and on being satisfied that-

The applicant is eligible and in its opinion is likely to

meet effectively its obligations imposed under the act.

The applicant has not been penalized by RBI/SEBI or by

any other regulatory agency for serious fraud etc.

The license so granted will be valid for a period of 3

years .The same may be renewed for further period of 3

D.) Specified Person:

An individual desiring to become a specified person of

Bancassurance Agent shall apply through the
Bancassurance Agent Form IRDA-BD-A-2 to the
insurer.No other person except the specified person shall

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solicit or procure the insurance business on behalf of the
Bancassurance Agent.

E.) Ceiling on number of tie ups on

Bancassurance Agent:

No Bancassurance Agent shall tie up with more than one

life and one non life insurance company in any of the

Further provided that in case the agreement of general

insurer do not have any health product to distribute ,then
thje Bancassurance Agent may tie up with one more
general insurance company carrying on exclusively the
business of health insurance.

F.) Qualifications:

(a) The applicant shall ensure that MOA or any other

document evidencing the constitution of the entity shall
contain as one of its main objects.

(b) The Chief Bancassurance Executive shall possess the

minimum qualification:

An associate or fellow of the III,Mumbai;

An associate or fellow of ICAI,New Delhi;

An associate or fellow of the ICSI,New Delhi;

An associate or fellow of the Acturial Society Of


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MBA of any Institution/University recognized by

Possessing Certified Associateship Of Indian Institute Of


Possessing any professional qualification in marketing

from any Institution/University recognized by any

Any other qualification as may be recognized by the


(c) A Specified person shall possess the minimum

qualification of Graduation or Equivalent examination
conducted by any recognized University/Institution.

(d) Every Chief Bancassurance Executive and each of

the Specified Persons shall also not suffer from any of
the disqualifications .

G.) Examination:

The Chief Bancassurance Executive of the applicant or a

specified person shall have passed the pre recruitment
exaqmination in life or general insurance business as a
case may be conducted by III Mumbai .

The examining body shall issue a certificate to every

successful specified person,which shall make him
eligible to procure the insurance business on behalf of
the Bancassurance Agent.

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H.) Fee Payable:

a.The fee payable to the authority for the issue or

renewal of license to act as a bancassurance agent shall
be Rs 250-/

b.Every specified person of the bancassurance agent

shall apply through the bancassurance agent to the
designated person of the insurer to obtain the
certificate,accompanied by a fee of Rs 500 remitted to
the authority.

I.) Maintainence Of Books Of Accounts,Records:

1. Every Bancassurance Agent shall file the statement of

remuneration as per the format IRDA-BA-3 by the Chief
Bancassurance Executive ,MD,CFO and audited by the
statutory auditor within 6 months from the end of the
financial year.

2.All the books of accounts,statements,documents etc

shall be maintained at the H.O. of the Bancassurance
Agent or such other branch office as may be designated
by him and notified to the authority ,and shall be
available on all working days to such officers of the

3.All the books of accounts,statements,documents etc

referred to in this regulation and maintained by the
Bancassurance Agent shall be retained for a period of
atleast 10 yrs from the end of the year.

Every Bancasssurance Agent shall before the end of 15th

nov of each year furnish to the Authority halfyearly

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unaudited statements alongwith a declaration confirming
the fulfillment of the requirement of the Specified
Person in each and every branch.

J.) Authority’s Right To Inspect:

1. The Authority may appoint one or more of its officers

as an Investigating Officer” to undertake the inspection
of premises of the Bancassurance Agent to ascertain and
see whether the business is carried on as per the
act,regulations from time to time.And also to inspect the
books of accounts,records,statements,documents etc of
the bancassurance agent for any of the purposes
specified in sub regulation 2.

2. The purpose referred in sub regulation 1 includes:

 To ensure that the books of accounts are being

maintained in the manner required.
 To ensure that the provision of the
act,rules,regulations are being compiled with.
 To investigate the complaints received from any
insured ,insurer,other stakeholders on any matter
having a bearing on the activities of the
Bancassurance Agent;
 To investigate the affairs to the bancassurance
agent suo motu in the interest of proper
development of the insurance business .
 Provided that,before undertaking an
inspection,the authority shall give a notice of 7
days to the Bancassurance Agent.

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K.) Code Of Conduct:

1. Every Bancassurance Agent shall abide by the code of

conduct as specified below:-

Every Bancassurance Agent shall:

 Be responsible for all acts of omission and
commission of its Chief Bancassurance
Executive and every Specified Person.
 Ensure that the reporting level of the Chief
Bancassurance Executive is not below the MD .
 Ensure that each branch of the Bancassurance
Agent has a specified person whose particulars
has been filed with the designated person.
 Ensure that the Chief Bancassurance Executive
and the Specified Person do not make to the
prospect any misrepresentation on the policy
benefits and returns available under the policy.
 Ensure that the no prospect is forced to buy the
insurance product.
 Give adequate pre sale and post sale advice to
the insured in respect of the insurance product.
 Ensure that every sale of the insurance product
is supported by the need analysis format duly
signed by the insured.
 Ensure that the Chief Bancassurance Executive
and the Specified Persons all are properly
trained,skilled etc.

2. Every Bancassurance Agent or a Chief Bancassurance

Executive or a Specified Person shall:-

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 Identify himself and the insurance company of
whom he is a representative.
 Disclose the license or certificate to the prospect
on demand.
 Disseminate the requisite information in respect
of the insurance products offered for sale by his
insurer and take into an account the needs of the
prospect while recommending the specific
insurance plan.
 Disclose the scale of commission in respect of
the insurance product offered for sale.
 Indicate the premium to be charged by the
insurer for the insurance product offered for
 Inform promptly the prospect about the
acceptance or rejection of the proposal by the
 Obtain the requisite documents at the time of
filing the proposal form with the insurer and
other documents subsequently asked for by the
insurer for the completion of the proposal.
 Render the necessary assistance to the
policyholders or claimants or beneficiaries in
complying with the requirements for the
settlement of claims by the insurer.
 Explain to the prospect the nature of information
required in the proposal form by the insurer and
also the importance of disclosure of material

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L.) Renewal Of License:

 Every license granted by the Authority to the

Bancassurance Agent or any renewal thereof ,in
terms of these regulations shall remain in force
for 3 years.
 A license granted to the Bancassurance Agent
may be renewed for further a period of 3 years
on the submission of the application form
alongwith a renewal fee of Rs 250 atleast 30
days prior to the date of expiry of the license.
 The additional fee payable to the authority under
the circumstances mentioned in sub section (3)
of section 42 of the act shall be Rs 100.
 The authority may if it is satisfied that undue
hardship would be caused otherwise,accept any
application after the license ceased to remain in
force,by the applicant on the payment of Rs 750
as an additional fee.
 Every certificate granted to the specified person
shall remain in force for a period of 3 years
which can be renewed for a further period of 3
years on submission of an application form
accompanied by fees of Rs 100 provided that the
license of the Bancassurance Agent continues to
be valid.
 The specified person on his ceasing to be an
employee of the Bancassurance Agent shall
surrender his certificate to the designated
person.If he desires to become an individual
insurance agent then he shall follow the
procedure as laid down in IRDA.

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M.) Suspense and Cancellation of

 Where a Bancassurance Agent or Chief

Bancassurance Executive or a specified person
which has been granted a license or certificate
as a case may be under these regulation:
 Suffers at any time during the period of the
license or certificate as a case may be from any
of the disqualifications specified in sub section
(4) of section 42 of the act.
 Fails to comply with any of the conditions
subject to which the license or certificate ,as a
case may be granted.
 Fails to furnish any information relating to his
activities as an bancassurance agent as required
by the authority.
 Furnishes wrong or false information or
conceals to disclose the material facts in the
application submitted for obtaining the license.
 Contravenes any of the provisions of the act,
The IRDA ,1999(41 of 1999),the regulations
framed thereunder and such other guidelines or
the directions as issued by the Authority from
time to time.

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N. ) Issue Of Duplicate License:

The Authority may on the payment of a fee of Rs 50

issue a duplicate license to replace the license which is
lost,destroyed or mutilated.

O.) Compliance with KYC :

The Bancassurance Agent shall carry out the Due

Diligence and KYC of an insured as prescribed by
RBI.Insurers may rely upon the due diligence and know
your customer carried out by the Bancassurance Agent.

P.) Ombudsman Jurisdiction:

The Bancassurance Agent shall come within the ambit of

Banking Ombudsman Scheme 1995 for the purpose of
redressal of grievance against deficiency of
services.Subject to the Banking Ombudsman Scheme
1995 ,Regulation 2 of the Banking Ombudsman Scheme
shall also include complaints regarding to the services of
a bancassurance agent.Any person aggrieved by the
service of the Bancassurance Agent shall file a
complaint under regulation 16 of the Banking
Ombudsman Scheme 1995 for the redressal.

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Recent Tie –Ups Of Banks And
Insurance Companies:






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Tie Ups Of Banks With Life
Insurance Companies:

Life Insurance Company Banking Partner

ICICI Prudential Federal bank,ICICI


HDFC Standard Union Bank Of

Bank,BOB,Indian bank

Tata AIG HSBC,Citibank,IDBI


SBI Life SBI, BNP Paribas

Bajaj Allianz Standard Chartered
Bank,Syndicate bank

Metlife Dhanlaxmi
Bank,Karnataka bank,
J&K Bank

LIC OBC,Vijaya
bank,Corporation bank

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Tie Ups Of Banks With General
Insurance Companies:

General Insurance Banking Partner


National Insurance Allahabad

Company Bank,BOI,Vijaya bank

The Oriental Insurance Oriental Bank Of

Company Ltd Commerce,State Bank Of
The New India Assurance UBI,SBI

United India Insurance Ltd. PNB, Indian bank, Federal

Bank, Syndicate Bank


Reliance General Insurance Development Credit

Bank,UCO Bank

ICICI Lombard ICICI Bank,Centurion


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 Bancassurance industry is a growing industry
but there are certain loopholes in it like people
hardly trust especially the private industry
companies.Even though there are around 29
banks and 12 insurance companies working
together as a Bancassurance Companies in India
but still its % share is considerably less.
 With the opening up of the insurance sector and
with so many players entering the Indian
Insurance Industry ,it is required by the
Insurance companies to come up with well
established infrastructure facilities with good
call centre to attract and provide information to
the customer regarding different policies.
 The penetration level of life insurance in the
Indian market is low at 2.3% of GDP with only
8% of the total population currently insured.
 Where the legislation has allowed
Bancassurance had mostly been a phenomenal
success and although slow to gain pace is now
taking across Asia.Especially now banks are
starting to become more diverse financial
institution and the concept of universal banking
is being adopted.
 In the field of Bancassurance Banks will bring a
customer database,leverage their
name,recognition and reputation .If they are
using personal contact with the customers then
only they can success in the field of

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 Proper implementation of the bancassurance is
still facing so many hurdles and obstacles
because of the poor management ,lack of call
centres,no personal contacts with the
customers,inadequate incentives to the agents
and non fulfillment of the essential
 Finally,we can say that the Bancassurance would
mostly depend on how the well insurers and the
bankers understanding is with each other ,how
they are capturing the opportunity and how
better they are providing the service to their
customers.Bancassurance companies should
create more awareness among the people about
the importance of the insurance in one’s
life.There should be insurance oriented
programs conducted by the Bancassurance
Companies especially in the rural and semi
urban areas.The leading banks should be more
involved in promoting and selling the
Bancassurance in order to gain the trust of the
common mass of people’s.

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With a huge untapped market,insurance sector is likely

to witness a lot of activity being it product innovation or
distribution channel.Bancassurance,the emerging
distribution channel for the insurer will have a large
impact on Indian financial service industry.Traditional
method of distributing financial services would be
challenged and innovative.

Proper implementation of Bancassurance is still facing

some problems such as poor manpower,managerial
database expertise,inadequate incentives,negative
attitude towards the insurance etc.In order to get the full
benefit of it following steps should be taken which are as

 Service Delivery Mechanism should be

 Knowledge of target customer needs should be
 Extensive and high quality training should be
 Strategies consistent with the banks vision
should be developed.
 Bank’s Database System should be made
flexible in order to cope up with the changes.

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The training should be given to all employees of

the bank with respect to cross selling.
Bank employees should be motivated to take the
training by specifying the commission `amount
which they are going to get after the cross
Bank should try to facilitate online and internet
payment toward the insurance product.
They should also be given training regarding all
product offering with the quality service
delivery and administration.
Bank staffs should make an effort to educate the
public about the social security provided by the
insurance policies.
In order to attract more policyholders ,the bank
employees and the insurance agents should
promptly attend to the inquiries of the policy
Bank employees who are involved in the
Bancassurance should be given full knowledge
to the target customers.
In order to encourage low age groups to take the
life insurance policies ,insurance companies may
came forward with the innovative schemes.
All the policy holders who come under the tax
brackets should be provided with the necessary
documents for claiming the tax concession.

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 Principles and practice of Insurance –
 Insurance:Principles And Practice –
 Principles And Practice Of Insurance – GS
Panda and Monika Mahajan
 Insurance And Risk Management –



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