Life Insurance Marketing in India (B) The Changing Distribution Norms

Distribution Initiatives of the New Players Contd...

According to analysts, it not only helped insurance companies increase market penetration and premium turnover, it also helped banks increase their Return on Assets (ROA – annual earnings divided by total assets). This was because, even with a constant asset base, bancassurance contributed to enhanced ROA through fee income. (Refer Table III for various bancassurance agreements). Allianz Bajaj Life Insurance (Allianz Bajaj) planned to build a multi-channel distribution network, which included agents, corporate agents and strategic alliances with banks, Bajaj Auto network and other direct marketing initiatives. In late 2001, it signed a Memorandum of Understanding (MOU) with Standard Chartered Bank for an exclusive bancassurance distribution agreement. According to reports, Standard Chartered was to act as the corporate agent for the company, and the partnership was expected to leverage the bank's 60 branches across the country.

Standard Chartered Finance (a subsidiary of Standard Chartered Bank) was also expected to market Allianz Bajaj's products. Companies such as HDFC Standard Life, ICICI Prudential Life, and SBI Life insurance planned to leverage the branch network of their parent companies, HDFC, ICICI Bank and SBI respectively, for distributing their products.

Reaching out to the bank's existing customers would be very easy for the insurance companies as the banks already had a well-established relationship with their customers.

Since SBI had a network of over 9,000 branches, SBI stood to gain a lot by utilizing the bancassurance channel. It was reported that by the end of 2001, 21 branches of SBI were distributing SBI-Cardiff's group policies.

Many analysts believed that bancassurance would play a very important role in India because banks were familiar with the target customers' needs, had a strong service delivery mechanism, good quality administration, complete integration of insurance and bank products and services, qualified personnel and an organized tracking system for reporting on agents' time and the results of bank referrals. However, it was also pointed out that the partnership between insurers and banks could run into problems.

The most common problems that partners could face were inefficient manpower management, lack of sales culture within the bank, lack of branch personnel's involvement, insufficient product promotions, failure in integrating marketing plans of both bank and insurance company, limited database expertise of the bank and inadequate incentives to the bank personnel involved in sales of insurance products. Despite the growing thrust on bancassurance, most of the players believed that individual agents would continue to play a major role in the Indian insurance industry.

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Case Details

Case Code : MKTG027
Themes: Distribution
Case Length : 10 Pages
Period : 2000-2002
Organization : ICICI Prudential, Max New York Life, ETC
Pub Date : 2002
Teaching Note : Available
Countries : India
Industry : Insurance

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