Bancasssurance

Bancassurance : A Feasible Strategy for

Banks in India ?

* Assistant Adviser in the Department of Economic Analysis and Policy. This paper was originally

presented at the All India Economics Conference organized by Shri Satya Sai Institute of Higher

Learning, Puttaparthi in 2005. Dr Satyananda Sahoo and Ms. Suja Joy (LIC) are acknowledged

with thanks for their editorial suggestions on the earlier version. The usual disclaimer applies.

A. Karunagaran*

This paper attempts to explore the scope for bancassurance models as feasible source

of sustainable income to banking sector by exploiting the synergy in the context of India

having the largest banking network on the one hand and lower insurance penetration and

insurance density on the other hand. While analysing the present trend of banks handling

insurance products, it also highlights some of the likely issues in general as well as specific

from the point of regulator and supervisor. It concludes that going by the present pace,

bancassurance would turn out to be a norm rather than an exception in future in India and

it would be a ‘win-win situation’ for all the parties involved - the customer, the insurance

companies and the banks.

JEL Classification : G21, G22

Keywords : Bancassurance, Banks in Insurance Business, Insurance penetration

and density in India.

Reserve Bank of India Occasional Papers

Vol. 27, No. 3, Winter 2006

Introduction

World over the idea of separation of roles between banks and

other financial activities has become redundant. Even in the United

States which was known for strict separation of banking and nonbanking

activities during the Glass-Steagall Act regime broke the

dividing wall. The post Gramm-Leach-Bliley (GLB) Act, 1999

scenario, it is stated to have indicated increased preference for banks

coterminously dealing with other non-banking financial products,

including the insurance products. In Asian countries (e.g., Taiwan,

Singapore, Japan, etc.) too the trend...