Bank assurance Applied @ Sbi Project Report Mba Finance

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BANCASSURANCE HAS BEEN APPLIED IN STATE BANK OF INDIA

INDEX

Sl.No. CONTENT PAGE NO

1 Executive summary 1

2 Research Methodology 4

3 Company Profile 7

4 Introduction to the Topic 21

5 Analysis 70

6 Observations 100

7 Suggestions 102

8 Conclusion 103

9 Reference 105

10 Annexure 106

BABASAB PATIL Page 1


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EXECUTIVE SUMMARY

The banking and insurance industry have changed rapidly in the changing and challenging

economic environment through out the world. In the competitive and liberalized

environment everyone is trying to do better than others and consequently survival of the

fittest has come into effect. Insurance companies are also to be competitive by cutting cost

and serving in a better way to the customers. Now the time has come to choose and adopt

appropriate distribution channel through which the insurance companies can get the

maximum benefit and serve customers in manifolded ways. Multi channel distribution and

marketing of insurance products will be the smart strategy to continue to play an important

role in distribution, alternative channels like corporate agents brokers and bancassurance

will play a greater role in distribution.

One of the more recent examples of financial diversification is bancassurance, the term

given to the distribution of insurance products through branches or other distribution

channels of the banks. The concept that originated in France, now constitutes the dominant

model in a number of European and other countries and the same is fast catching up in

India as well.

SBI Life Insurance Company, a joint venture between SBI and Cardif S.A., a leading life

insurance company of France, is a predominant player in bancassurance. This project report

gives an idea about A study on Bancassurance at State Bank of India, Goaves branch,

Belgaum. In this project report an effort has been made to understand the concept of

Bancassurance and its practical applicability at State Bank of India, Belgaum. The study

also includes various aspects like which model of bancassurance is applied in State Bank of

India, the various individual and group insurance products which are marketed through

SBI, the benefits of Bancassurance to the bank, RBI and IRDA guidelines on

bancassurance and the evaluation of the future prospects of bancassurance in SBI.

examples of ion

But there are challenges, the most common challenges to success of bancassurance are poor

manpower management, lack of a sales culture within the bank, insufficient product



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promotions, failure to integrate marketing plans, marginal database expertise, poor sales

channel linkages, inadequate incentives, resistance to change, negative attitude towards

insurance and unwieldy marketing strategy. Even insurers and banks that seem ideally

suited for a bancassurance partnership can run into problems during implementation. One

more important obstacle in development of bancassurance in India has been a set of

regulatory barriers. Some of these have recently been cleared with the passage of the

Insurance (Amendment) Act, 2002. Particularly with reference to SBI, bancassurance is

gaining acceptance gradually. Bank is converging towards a model of global retail financial

institution offering a wide array of products creating a one stop-shop where mortgages,

savings, pensions and insurance products will be available.

Observations:

1) The joint venture model of bancassurance is applied in SBI. SBI Life is the joint

venture between SBI and Cardif life insurance company of France. SBI provides

network, Cardiff provides technology.

2) Bancassurance is beneficial for the banks, because

i. The chances of loan becoming Non performing assets will be reduced as it

gives security to the loan amount.

ii. It reduces the risk of loans becoming debt loans to the bank.

iii. It helps the bank by increasing the skills of the employees.

iv. It increases the total other income of the bank.

3) The proportion of total miscellaneous income in total income has been increased

after the branch took up the activity of cross selling.

4) Major portion of the employees have not been given any training for cross selling.

5) Out of 30 bank employees, 73.3% employees are involved in the activity of

bancassurance.

6) Out of 22 employees who are involved in the activity of cross selling, 90.9%

employees opine that it is increasing their skills.

7) Cross selling is advantageous to the bank as when two customer accounts are

compared i.e. one who has taken bancassurance with another customer who has not



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taken bancassurance, the bank is more benefited incase of customer who has taken

bancassurance.

Suggestions:

1) Training should be given to all the employees of the branch with respect to cross

selling.

2) Banks have witnessed a decline in margins in their core lending business due to

falling interest rates. Insurance distribution helps to increase the fee based earnings

of banks to a considerable extent. So the bank employees should try to increase the

total other income of the bank by doing cross selling.

3) Bank employees who are involved in bancassurance should be given full

knowledge of the target customers.

4) In order to attract more policy holders, the bank employees and insurance agents

should promptly attend to the enquiries of policyholders.

5) Bank should try to facilitate online and internet payments towards insurance

products.

Conclusion:

With reference to SBI, bancassurance is gaining acceptance gradually. Bank is converging

towards a model of global retail financial institution offering a wide array of products

creating a one stop-shop where mortgages, savings, pensions and insurance products will

be available. Some of the regulatory issues need to be addressed comprehensively and

sorted out particularly with respect to competition and market structure problems. Given

these changes, bancassurance and collaboration between banks and insurers has a long way

to go in India.

RESEARCH METHODOLOGY

Objectives of the Study:



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1. To understand the concept of Bancassurance and its practical applicability at State

Bank of India, Belgaum.

2. To know which model of Bancassurance is applied in State Bank of India.

3. To study the various individual and group insurance products which are marketed

through State Bank of India.

4. To find out the benefits of Bancassurance to the bank.

5. To study the Reserve Bank of India (RBI) and Insurance Regulatory Development

Authority (IRDA) guidelines on Bancassurance.

6. To evaluate the future prospects of Bancassurance in State Bank of India.

Statement of the problem:

Globally, cross selling is a major component of the business of banks. In India too, it is

catching up fast with several of the banks. SBI is the leading bank among all nationalized

banks having largest banking network in the country, also has made headway in selling the

insurance products along with the banking products. Cross selling would help the banks by

boosting their fee income. So there is a scope to study how the concept of bancassurance

has been applied in State Bank of India.

Scope of the Project:

The study is limited to State Bank of India, Goaves Branch, Belgaum.

The study will be conducted on the basis of past three years performance of the

bank.

Limitations of the study:

Detailed information is not provided by the bank staff because of the privacy policy of the

bank.

Data collection method:

Primary data is collected through;



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Observation

Discussion with the bank manager and bank employees.

Filling up of the questionnaire from the bank staff.

Secondary data is gathered through;

The financial statements of the bank.

From various books, websites, magazines, bank brochures etc.

Tools used for analysis:

MS Excel

Graphs and charts

SPSS

Need for the study:

Squeeze on margins of fund based revenue has taken place in the

banks now. Growing disintermediation by corporate borrowers, better inventory

practices that have reined in working capital needs and a liberalized external borrowing

regime coupled with dwindling international rates have eaten fund incomes of the bank.

Banks have felt a need to offset these through growing fee incomes particularly from

retail side. So there is a need to study how the bank is trying to increase its fee based

revenue.

Staff retention and motivation is another big challenge for the

banks now. While the opportunities in other sectors are increasing, to retain the

employees, bank must provide diversification in the work. So there is a need to study

how the bank is using the activity of bancassurance to motivate the employees to

remain in the bank.

Universal Banking- approach to provide all financial products

under one roof; is another need for the study. It is nothing but integration of the

financial services industry in terms of banking, insurance and securities business. The



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banks have been looking towards bancassurance, a mechanism of distribution of

insurance products through a banks network, as a step towards universal banking.

Moreover, hawking of insurance products by banks is seen as a logical step for

expanding their business and improving the bottom line.

Optimum utilization of infrastructure and resources to maximize

revenue has also created the need for the study. It is necessary to study how the bank is

optimally utilizing the resources and infrastructure through the activity of

bancassurance.

Customer retention in the face of competition is very difficult

for the banks. If the bank provides any additional services along with the usual banking

services then only it can survive in the era of competition. So there is a need to study

how the bancassurance is helping the bank to retain its customers.



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COMPANY PROFILE

Overview of Indian Banking structure:

Banking structure as of 31st Mar 2004 is depicted in the following chart:

The growth of Indian banking business can be summed up in the following six phases:

No Period Phases

1 1900 to 1949 Births and deaths of many private banks.

2 1949 & 1969 Laying of solid and sound foundation; enactment of Banking

Companies Regulation Act 1949.

3 1969 to 1985 Branching out phase, nationalization of 19 private banks, lead bank

scheme.

4 1985 to 1991 Consolidation phase, weaknesses and defects of mass branch

banking were investigated by various committees.5 1991 to 2004 Reforms and strengthening. First dose of reforms with Sri. M.

Narasimham Committee report in 1991. consequently there were

series of reforms in SLR, CRR, new norms of assets classification,

NPAs and its provisioning, Basel I capital adequacy norms and

other prudential norms, permission for entry of new generation of

private sector banks, deregulation of interest, risk based

management, adoption of computer technology, setting up of debt

recovery tribunal, and passage of securitization and reconstruction

of financial assets and enforcement of Security Interest Act

(SARFAESI) 2002.

6 2004 to date Integration and consolidation phase. BoB absorbed South Gujarath

Local area Bank Ltd in June 2004, GBT merged with OBC in

August 2004, merger of SBI & its subsidiaries, UBI & BOI are

proposed. Even RRBs are merging. In Sept 2005 all RRBs

sponsored by Syndicate bank in Karnataka are merged into

Karnataka Grameen Vikas Bank. So also Punjab National Bank

sponsored RRBs in Punjab. Preparing for Basel II from Jan 2006.

Overview of Indian Insurance Industry

Indian insurance business is divided into four classes: 1) Life insurance 2)Fire insurance

3)Marine insurance 4)Miscellaneous insurance. The life insurance business is confined to



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life insurers and non life insurance businesses can be done by general insurers only, as no

composites are permitted as per law.

In the last five decades, insurance sector in India has come full circle, from open

competitive market to full nationalization and now back to liberalized market where both

private and public sector companies have level playing ground.

A birds-eye view of insurance sector reforms

No Date Reforms

1 September

1956

Incorporation of LIC and merger of 245 private life insurers,

nationalized in Jan 1956.

2 January 1972

January 1973

January 1974

Nationalization of general insurance (106 private insurers)

Incorporation of GIC (General Insurance Corporation)

Formation of four subsidiaries of GIC to take over 106 insurers.

3 April 1993 Malhotra committee on insurance sector reforms and deregulation

set up.

4 January 1994 Malhotra committee submits report to the finance minister.

5 December

1996

IRDA Bill introduced in Parliament & referred to the standing

committee.

6 August 1997 IRDA is withdrawn following opposition to foreign participation

7 November

1997

Government of India clears greater autonomy to LIC and GIC.

8 June 1998 Union budget announces opening up of insurance sector

9 January 1999 Notification of IRDA as a statutory authority

10 October 1999 Approval of IRDA bill by the cabinet with FDI limited to 26%

11 February 2000 Insurance bill presented in the budget session

12 October 2000 Private insurance companies are back

Malhotra committee, appointed by the Government of India for conducting a study on

insurance, in its report in 1994 stated that only 22% of the Indian population is insured. It

has also pointed out that the Indian insurance business is under developed due to state

monopoly and lack of aggressive marketing of insurance policies. With setting up of IRDA

in Jan 1999, the insurance industry has been opened up, with a restriction of 26% on

foreign ownership to Indian insurers and there has been tremendous amount of

transformation. Till April 2000, it was Life Insurance Corporation of India and General

Corporation of India with its four subsidiaries that operated in a monopoly position of life



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and general insurance business, respectively. From October 2000, private players started

invading this sector. As of March 2004, the number of private players in the life insurance

sector has been thirteen. The traditional stronghold of LIC is now the playground of these

new players. With effect from Dec 2000, GIC started to operate as a national re-insurer.

GICs four subsidiaries are de-linked and made as independent insurance companies. As of

Mar 2004, eight private companies, ECGC (Export Credit Guarantee Corporation Ltd) and

Agricultural Insurance Company of India Ltd (AIC) are operating in general insurance

besides erstwhile subsidiaries of GIC.

Evolution of State Bank of India:

The origin of the State Bank of India goes back to the first decade of the nineteenthcentury with the establishment of the Bank of Calcutta in Calcutta on 2 June 1806. Three

years later the bank received its charter and was re-designed as the Bank of Bengal(2

January 1809). A unique institution, it was the first joint-stock bank of British India

sponsored by the Government of Bengal. The Bank of Bombay (15 April 1840) and the

Bank of Madras (1 July 1843) followed the Bank of Bengal. These three banks remained at

the apex of modern banking in India till their amalgamation as the Imperial Bank of India

on 27 January 1921.

Primarily Anglo-Indian creations, the three presidency banks came into existence either as

a result of the compulsions of imperial finance or by the felt needs of local European

commerce and were not imposed from outside in an arbitrary manner to modernize India's

economy. Their evolution was, however, shaped by ideas culled from similar developments

in Europe and England, and was influenced by changes occurring in the structure of both

the local trading environment and those in the relations of the Indian economy to the

economy of Europe and the global economic framework.



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Bank of Bengal H.O.

Establishment

The establishment of the Bank of Bengal marked the advent of limited liability, joint-stock

banking in India. So was the associated innovation in banking, viz. the decision to allow

the Bank of Bengal to issue notes, which would be accepted for payment of public

revenues within a restricted geographical area. This right of note issue was very valuable

not only for the Bank of Bengal but also its two siblings, the Banks of Bombay and

Madras. It meant an accretion to the capital of the banks, a capital on which the proprietors

did not have to pay any interest. The concept of deposit banking was also an innovation

because the practice of accepting money for safekeeping (and in some cases, even

investment on behalf of the clients) by the indigenous bankers had not spread as a general

habit in most parts of India. But, for a long time, and especially up to the time that the three

presidency banks had a right of note issue, bank notes and government balances made up

the bulk of the investible resources of the banks.

The three banks were governed by royal charters, which were revised from time to time.

Each charter provided for a share capital, four-fifth of which were privately subscribed and

the rest owned by the provincial government. The members of the board of directors, which

managed the affairs of each bank, were mostly proprietary directors representing the large

European managing agency houses in India. The rest were government nominees,

invariably civil servants, one of whom was elected as the president of the board.



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Group photograph of Central Board (1921)

Business

The business of the banks was initially confined to discounting of bills of exchange or

other negotiable private securities, keeping cash accounts and receiving deposits and

issuing and circulating cash notes. Loans were restricted to Rs.1 lakh and the period of

accommodation confined to three months only. The security for such loans was public

securities, commonly called Company's Paper, bullion, treasure, plate, jewels, or goods 'not

of a perishable nature' and no interest could be charged beyond a rate of twelve per cent.

Loans against goods like opium, indigo, salt woolens, cotton, cotton piece goods, mule

twist and silk goods were also granted but such finance by way of cash credits gained

momentum only from the third decade of the nineteenth century. All commodities,

including tea, sugar and jute, which began to be financed later, were either pledged or

hypothecated to the bank. Demand promissory notes were signed by the borrower in favor

of the guarantor, which was in turn endorsed to the bank. Lending against shares of the

banks or on the mortgage of houses, land or other real property was, however, forbidden.

Indians were the principal borrowers against deposit of Company's paper, while the

business of discounts on private as well as salary bills was almost the exclusive monopoly

of individuals Europeans and their partnership firms. But the main function of the three

banks, as far as the government was concerned, was to help the latter raise loans from time

to time and also provide a degree of stability to the prices of government securities.



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Old Bank of Bengal

Major change in the conditions

A major change in the conditions of operation of the Banks of Bengal, Bombay and Madras

occurred after 1860. With the passing of the Paper Currency Act of 1861, the right of note

issue of the presidency banks was abolished and the Government of India assumed from 1

March 1862 the sole power of issuing paper currency within British India. The task of

management and circulation of the new currency notes was conferred on the presidency

banks and the Government undertook to transfer the Treasury balances to the banks at

places where the banks would open branches. None of the three banks had till then any

branches (except the sole attempt and that too a short-lived one by the Bank of Bengal at

Mirzapore in 1839) although the charters had given them such authority. But as soon as the

three presidency bands were assured of the free use of government Treasury balances at

places where they would open branches, they embarked on branch expansion at a rapid

pace. By 1876, the branches, agencies and sub agencies of the three presidency banks

covered most of the major parts and many of the inland trade centers in India. While the

Bank of Bengal had eighteen branches including its head office, seasonal branches and sub

agencies, the Banks of Bombay and Madras had fifteen each.



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Bank of Madras Note Dated 1861 for Rs.10

Presidency Banks Act

The presidency Banks Act, which came into operation on 1 May 1876, brought the three

presidency banks under a common statute with similar restrictions on business. The

proprietary connection of the Government was, however, terminated, though the banks

continued to hold charge of the public debt offices in the three presidency towns, and the

custody of a part of the government balances. The Act also stipulated the creation of

Reserve Treasuries at Calcutta, Bombay and Madras into which sums above the specified

minimum balances promised to the presidency banks at only their head offices were to be

lodged. The Government could lend to the presidency banks from such Reserve Treasuries

but the latter could look upon them more as a favor than as a right.

Bank of Madras

India witnessed rapid commercialization in the last quarter of the nineteenth century as its

railway network expanded to cover all the major regions of the country. New irrigation

networks in Madras, Punjab and Sind accelerated the process of conversion of subsistence

crops into cash crops, a portion of which found its way into the foreign markets. Tea and

coffee plantations transformed large areas of the eastern Terais, the hills of Assam and the

Nilgiris into regions of estate agriculture par excellence. All these resulted in the expansion

of India's international trade more than six-fold. The three presidency banks were both

beneficiaries and promoters of this commercialization process as they became involved in

the financing of practically every trading, manufacturing and mining activity in the sub-

continent. While the Banks of Bengal and Bombay were engaged in the financing of large



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modern manufacturing industries, the Bank of Madras went into the financing of large

modern manufacturing industries; the Bank of Madras went into the financing of small-

scale industries in a way which had no parallel elsewhere. But the three banks were

rigorously excluded from any business involving foreign exchange. Not only was such

business considered risky for these banks, which held government deposits, it was also

feared that these banks enjoying government patronage would offer unfair competition to

the exchange banks which had by then arrived in India. This exclusion continued till the

creation of the RBI in 1935.

Bank of Bombay

Presidency Banks of

Bengal

The presidency Banks of Bengal, Bombay and Madras with their 70 branches were merged

in 1921 to form the Imperial Bank of India. The triad had been transformed into a monolith

and a giant among Indian commercial banks had emerged. The new bank took on the triple

role of a commercial bank, a banker's bank and a banker to the government.But this creation was preceded by years of deliberations on the need for a 'State Bank of

India'. What eventually emerged was a 'half-way house' combining the functions of a

commercial bank and a quasi-central bank. The establishment of the Reserve Bank

simultaneously saw important amendments being made to the constitution of the Imperial

Bank converting it into a purely commercial bank. The earlier restrictions on its business

were removed and the bank was permitted to undertake foreign exchange business and

executor and trustee business for the first time.

Imperial Bank

The Imperial Bank during the three and a half decades of its existence recorded an

impressive growth in terms of offices, reserves, deposits, investments and advances, the

increases in some cases amounting to more than six-fold. The financial status and security



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inherited from its forerunners no doubt provided a firm and durable platform. But the lofty

traditions of banking which the Imperial Bank consistently maintained and the high

standard of integrity it observed in its operations inspired confidence in its depositors that

no other bank in India could perhaps then equal. All these enabled the Imperial Bank to

acquire a pre-eminent position in the Indian banking industry and also secure a vital place

in the country's economic life.

Stamp of Imperial Bank of India

When India attained freedom, the Imperial Bank had a capital base (including reserves) of

Rs.11.85 Crores, deposits and advances of Rs.275.14 Crores and Rs.72.94 Crores

respectively and a network of 172 branches and more than 200 sub offices extending all

over the country.

First Five Year Plan

In 1951, when the First Five Year Plan was launched, the development of rural India was

given the highest priority. The commercial banks of the country including the Imperial

Bank of India had till then confined their operations to the urban sector and were not

equipped to respond to the emergent needs of economic regeneration of the rural areas. In

order, therefore, to serve the economy in general and the rural sector in particular, the All

India Rural Credit Survey Committee recommended the creation of a state-partnered and

state-sponsored bank by taking over the Imperial Bank of India, and integrating with it, the



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former state-owned or state-associate banks. An act was accordingly passed in Parliament

in May 1955 and the State Bank of India was constituted on 1 July 1955. More than a

quarter of the resources of the Indian banking system thus passed under the direct control

of the State. Later, the State Bank of India (Subsidiary Banks) Act was passed in 1959,

enabling the State Bank of India to take over eight former State-associated banks as its

subsidiaries (later named Associates).

The State Bank of India was thus born with a new sense of social purpose aided by the 480

offices comprising branches, sub offices and three Local Head Offices inherited from the

Imperial Bank. The concept of banking as mere repositories of the community's savings

and lenders to creditworthy parties was soon to give way to the concept of purposeful

banking sub serving the growing and diversified financial needs of planned economicdevelopment. The State Bank of India was destined to act as the pacesetter in this respect

and lead the Indian banking system into the exciting field of national development. State

Bank of India is proud to announce it having received the "TECHNOLOGY AWARD

2005" by The Banker, London.

Associate Banks: State Bank of India has the following seven Associate Banks (ABs) with

controlling interest ranging from 75% to 100%.

1. State Bank of Bikaner and Jaipur (SBBJ)

2. State Bank of Hyderabad (SBH)

3. State Bank of Indore (SBIr)

4. State Bank of Mysore (SBM)

5. State Bank of Patiala (SBP)

6. State Bank of Saurashtra (SBS)

7. State Bank of Travancore (SBT)

The seven ABs have a combined network of 4596 branches in India which are fully

computerized and 1070 ATMs networked with SBI ATMs, providing value added services

to clientele. The ABs recorded an impressive performance during 2003-04. The combined

net profit of these banks increased by 38% over the previous year to reach Rs.1938 Crores.



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Deposits and advances grew by 20% and 22%, respectively, during the year. Three of the

ABs viz. SBIr, SBP and SBS achieved NIL Net NPA status while the combined Net NPA

ratio of all ABs was at 0.84% as on 31st March 2004.

The Bank is actively involved since 1973 in non-profit activity called Community Services

Banking. All branches and administrative offices throughout the country sponsor and

participate in large number of welfare activities and social causes. Their business is more

than banking because they touch the lives of people anywhere in many ways. Their

commitment to nation-building is complete & comprehensive.

Board of Directors:

Central Board of State Bank of India (As on 8th October 2007)

Sl.No. Name of Director Sec. of SBI Act, 1955

1.Shri O.P. Bhatt

Chairman19(a)

2. Shri T.S. Bhattacharya

MD & GE (CB)19 (b)

3.Shri S.K. Bhattacharyya

MD & CC&RO19(b)

4. Shri Suman Kumar Bery 19(c)

5. Dr. Ashok Jhunjhunwala 19(c)



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6. Shri Ananta Chandra Kalita 19(ca)

7. Shri Amar Pal 19(cb)

8. Shri Piyush Goyal 19(d)

9. Dr. Deva Nand Balodhi 19(d)

10. Prof. Mohd. Salahuddin Ansari 19(d)

11. Shri Vinod Rai 19(e)

12. Smt. Shyamala Gopinath 19(f)

SBI Goaves branch, Belgaum started on 30th November, 1998. It has three divisions:-

Personal branch division: The main work of this division is to lend personal loans,

car loans, housing loans etc. Nine employees are working in this division.

Commercial branch division: It lends commercial advances above Rs.25 lakhs.

Currently, 18 employees are working in this division.

Retail Asset Credit Processing Cell: It carries out loan processing and follow up.

The total workforce in this division is twenty three.

Insurance Market in India - A Quick look:

With the progress of reforms, Insurance market has been flooded with a number of players.

As at end-March 2006, among the life insurers, there were 151 companies in private sector

and Life Insurance Corporation of India (LIC) was the solitary public sector company. As

regarding the present size of the insurance market in India, it is stated that India accounts

not even one per cent of the global insurance market. However, studies have pointed out

that Indias insurance market is expected to grow rapidly in the next 10 years. Mathur

(2004) for instance, stated that in spite of significant growth of life insurance business

through the outstanding efforts of LIC, only 25 to 26% of insurable population in India has

been insured. In terms of insurance penetration ratio (defined as ratio of insurance

premium to GDP), a key indicator of the spread of insurance coverage and insurance

culture, India compares poorly by international standards. The penetration ratio was less

than one per cent in 1990s and it improved to 4.8% by end-March 2006. As against this, a

Survey Report of Swiss Re revealed that the penetration ratio as at end-March 2006, in



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respect of some of the European countries, viz., UK and Switzerland at 16.5% and 11.0%.

In Asia, Taiwan and South Korea had registered their respective ratio of as high as 14.5%

and 11.1%. Insurance Penetration ratio for the World was placed at 7.5% far greater than

that of India. Thus in a country with more than 1.2 billion population, the poor penetration

ratio indicates that a vast majority of population remain outside the reach of the insurance,

especially in rural and semi-urban areas, in the context of the absence of social security

schemes. This clearly suggests the presence of vast potential for tapping the insurance

market particularly by widening the distribution channels. This is where the strategy of

bancassurance could possibly become more relevant.

The banking and insurance industry have changed rapidly in the changing and challenging

economic environment throughout the world. Insurance companies are also to be

competitive by cutting cost and serving in a better way to the customers. Now the time has

come to choose and adopt appropriate distribution channel through which the insurance

companies can get the maximum benefit and serve. The intermediaries in the insurance

business and the distribution channels used by carriers will perhaps be the strongest drivers

of growth in this sector. Multi channel distribution and marketing of insurance products

will be the smart strategy of continue to play an important role in distribution, alternative

channels like corporate agents brokers and Bancassurance will play a greater role in

distribution. The time has come for the industry to gradually move from traditional

individual agents towards new distribution channels with a paradigm shift in creating

awareness and not just selling products.

The game is old but the rules are new and still developing. However despite of its teaming

one billion population, India still has a low insurance penetration of 1.95 percent, 51st in

the world. Despite the fact that India boosts a saving rate around 25 percent, less

than 5% is spent on insurance. To streamline the saving into insurance, bancassurance is

the best channel to tackle four challenges facing the industry:- product innovation,

distribution, customer service and investments. In the age of stiff competition no one is

ready to loose its own possession.



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INTRODUCTION TO BANCASSURANCE

Though much ado was made about bancassurance, an alternate channel to hawk risk

products through banks, the channel is yet to pick up pace as of today. Most of the

insurance companies have already tied up with banks to explore the potential of the channel

that has been a success story in Europe and legislations are also in place.

Bancassurance primarily banks on the relationship the customer has developed over aperiod of time with the bank. And pushing risk products through banks is a cost-effective

affair for an insurance company compared to the agent route, while, for banks, considering

the falling interest rates, fee based income coming in at a minimum cost is more than

welcome.

The strategy for using the established, entrenched distribution network for one product to

market other new products has long existed in the consumer goods sector. Thus the

networks for soaps and detergents have been used by companies to distribute newly

launched food products, the distribution channel for Rados has been used to market

televisions and so on. Of course, the basic premise for this kind of cross selling is the fact

that companies keep diversifying their product portfolios, using established incumbent



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networks to promote and distribute new product lines. Banks, too, have in the recent past

adopted this strategy both in India as well as internationally. They have moved away from

the classical model of deposit taking and credit disbursal through their branch networks and

have begun to offer a wide range of products and services like security broking facilities

and mutual funds. This is the phenomenon of universal banking that builds on the

principle of leveraging existing networks to broaden portfolio offerings. Change in

regulatory regimes has also facilitated this diversification.

Growing disintermediation by corporate borrowers (direct borrowings by firms from the

debt market for both working capital and term loans), better inventory practices that have

reined in working capital needs and a liberalized external borrowing regime coupled with

dwindling international rates have all eaten into fund incomes of banks. In short, themargins or spreads that banks make between the cost of funds (deposits plus borrowings)

and the returns on funds (interest earnings on loans).

Banks have felt the need to offset these through growing fee incomes particularly from the

retail side. To target the retail segment, banks have felt the need to offer a more diversified

product range to appeal to a diverse range of risk profiles. On the other hand, stand-alone

financial product providers (NBCs, mutual funds etc.) have faced crippling

distribution costs that in the face of growing competition, they have not been able to pass

on as load on this product. Thus as far as banks and other financial services providers are

concerned, there has been a double coincidence of needs that has led them to collaborate

either through direct equity participation or ownership by banks or strategic alliances.

SBI Life Insurance Company a predominant player in bancassurance is positive about the

channel bringing about a transformation in the way insurance has been sold so far. The

company is banking heavily on bancassurance and plans to explore the potential of State

Bank of Indias 9000 plus branches spread across the country and also its 4000 plus

associate banks - one of the reasons why SBI Life Insurance is not laying much emphasis

on increasing its agent force from the present 3000.



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The company plans to appoint Certified Insurance Facilitators (CIFs) in a phased manner at

its branches. For now around 320 CIFs, one from each of its bank branches have been

identified for the purpose in addition to setting up insurance counters at its banking outlets.

The number is expected to go up to 500. Out of our present business of around Rs.150-200

crore bancassurance has brought in 50 percent while corporate agency and the agent

channel have contributed about 10 percent and 40 percent respectively, says Pradeep

Pandey, Head, PR, SBI Life Insurance Company. The company aims at acquiring 75

percent of the total business through bancassurance and the balance through the other

channels by 2007.

Definition of Bancassurance:

Bancassurance symbolizes the convergence of banking and insurance. It is the provision of

insurance and banking products and services through a common distribution channel or to a

common client base. The term has its origins in France and involves distribution of

insurance products through a bank's branch network. While bancassurance has developed

into a tremendous success story in Europe, it is a relatively new concept in Australia and

Asia.

Most new insurers have entered into memoranda of understanding with banks to use their

branches as outlets for marketing standard products. State Bank of India, Vysya Bank and

J&K Bank already have joint ventures in life insurance. Vijaya Bank and Punjab National

Bank are in the midst of finalizing life and non-life ventures.

Bancassurance, known as Alfinanze and most popular in Europe is the simplest way of

distribution of insurance products through a bank distribution channel. It is basically

selling insurance products and services by leveraging the vast customer base of a bank and

fulfill the banking and insurance needs of the customers at the same time. It takes the

various forms depending upon the demography, economic and legislative climate of the

country, while demographic climate will determine the kinds of insurance products,

economic climate will determine the trends in terms of turnover, market shares etc,



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legislative climate will decide the periphery within which bancassurance has to operate.

The motive behind the Bancassurance also differs. For banks it just acts as a means of

product diversification and additional fee income; for insurance company it acts as a tool

for increasing their market penetration and premium turnover and for customer it acts as a

bonanza in terms of reduced price, high quality products and delivery to doorsteps. So

every body is a winner here.

While banks and insurance companies stand to gain, what impact does it have on the retail

customer? Retail saving choices are getting increasingly complex internationally and Idea

is no exception. There is growing need for more diverse instruments and avenues of

investment. This coupled with need of integrated financial one stop shops to

reduce the transaction costs associated with diversification. Globally, insurance products

are a major internment savings and this is likely to be the case in India as well as insurance

penetration gathers steam. The issue of building brand equity is critical for new entrants

into the insurance market. However, tying up with a bank might provide counter-

productive if this objective is to be achieved. A number of surveys in the European market

have shown, for instance, that in bancassurance partnerships, it is the banks rather than the

insurers brand that dominates and insurance brands often get stifled.

Why insurers are turning to banks?

One of the key factors is that banks continue to command the highest trust among Indian

savers and investors and of the total pool of financial savings of households, 3 per cent (the

largest share) goes to bank deposits (RBI annual Report 2002).

For any providers of new financial products, banks are the fastest and most trusted

channel to reach households. Besides, the bank branch network of 62000 is virtually

impossible to replicate and would be indispensable in penetrating newer markets such as

rural markets. Bancassurance also leads to a significant lowering of distribution costs for

insurers.

World's perspective:-



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A SWOT analysis is done on bancassurance in the context of India.

Strengths:-

In a country like India of one billion people where sky is the limit. There is a vast untapped

potentials waiting for life insurance products. There are more than 900 million lives

waiting for life cover, 200 million house hold waiting for household insurance policy.

Millions of people traveling in and out of India are waiting for overseas mediclaim and

Travel insurance policies whole world is eyeing on the second largest middle class segment

after China to tap. Other than this there is a huge pull of skilled professionals to relocate the

bancassurance venture to provide new product through R&D last of all, LIC & GIC have

large branch network facility to implement bancassurance model very effectively.

Weaknesses:-

In the case of rapid growth of Information Technology banks and insurance companies are

still lacking its implementation. Though it is awakening but it is too late and too little. In

the age of Wide Area Net-work (WAN) and Vast Area Network (VAN), simple LAN has

not yet been introduced even in the head-quarters. They are over burdened with the

inflationary pressure and tax exemption for all insurance products will inspire the

customers (though it is done partially) to be insured. Another one is inflexibility of the

products, i.e. they are not tailor-made to the requirements of the customer.

Opportunities:-

Though not at the same level, banks data base in India is enormous and has to be dissected

variously and various homogeneous groups are chummed out in order to position

bancassurance products. With a good IT structure they can really do wonders. Appropriate

atmosphere and political conscientious have to be built up for liberalization and if it is done

then RBI or IRDA should have no hesitation in allowing the marriage of banking and

insurance sectors to take place. Merger and Acquisition or setting up of joint venture is

necessary in this direction.

Threats:-



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Success of bancassurance venture requires change in approach, thinking and work culture

on the part of everybody involved. In India there is always a tendency to restrict any

change whether its impact becomes favorable or not. So there should be a clear vehemence.

Sometimes non-response from the target customers becomes possible threat as it was found

in USA in 1980's and failed. US banks have turned their attention (since late 1990's)

towards life insurance. Again the investors in the capital may turn their face in case the rate

of return on capital falls short of the existing return on capital. So the

return from bancassurance must at least match those returns. Also unholy alliance is not

allowed to take place as there will be fierce competition in the market resulting in lower

price.

Bancassurance in State Bank of India Perspective:-

SBI Life insurance, a joint venture between State Bank of India, the largest bank in the

country and Cardif insurance company of France. Cardif has launched eight products so far

incorporating certain features that are introduced for the first time in the country. SBI -Life

is banking on the bancassurance model on the strength of the SBI Groups 10000 plus bank

branches and its vast customer base. In addition it is also tapping other banks corporate

agents and the traditional agency route to penetrate the insurance market SBI Life is

planning to introduce more novel and user friendly products to cater to the requirements of

the consumers in different segments.

There are so many insurance products launched so far. Among them 'sanjeevan' in June,

2001 (single premium policy for VRS retirees), Sukhjeban' (guaranteed returns for

allage groups), 'Scholar' (for children's higher education combining insurance cover for

parents and guardians), 'Swarna ganga' (premium is refunded in the form of saving element

with life cover and without obligation medical examination), 'Super Suraksha'

(For all deposit holders initially at SBI) are to name a few. Other challenging new products

are ready to come into the market to cover under the pension product, the unorganized

population such as, self employed professionals, Small traders, artisans, contract labors and

house hold helpers. SBI has the largest banking network in the county. The bank is looking

for business from every customer segment of the bank rural and urban segments, upper,



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middle and lower income segments / groups and corporate segment. Besides own channel,

they are planning to distribute products through other interested banking channels. Cardif,

SBI-Life's JV partner, has hand on experience with various banks around the world. In

France, it is selling insurance products through BNP Paribas network of banks, the largest

bank of the country and 35% of bank's retail banking profit comes from distributing

insurance products. SBI has customers in Solapur District of Maharashtra with huge

response. It is expected that 2/3 rd of the premium income in expected to come by way of

bancassurance and the rest from the traditional agency channel as well as ties up with

corporate agents (Sundaram Finance). SBI has also introduced group insurance to some

well managed corporate staffs. Premiums paid by corporates on behalf of their employees

qualify as a deductible expense and employees are not taxed, when employees pay

premiums on a saving linked group insurance scheme, the monthly contribution qualifies

for section 88 tax rebate and the final maturity sum received is also tax-free. Technology is

an integral part of this operation. Cardiff provided the technology required. Cardiff's PMS

software has been successfully implemented in 24 countries. It modified the software,

engaging TCS to suit our requirements.

BANCASSURANCE MODELSAccording to one school of thought, the bancassurance models are classified in the

following way;

I. Structural Classification:

a) Referral Model:

Banks intending not to take risk could adopt referral model wherein they merely 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 elsewhere. Referral model is nothing but a simple

arrangement, wherein the bank, while controlling 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 every business lead that was passed on. In fact a number of banks in India

have already resorted to this strategy to begin with. This model would be suitable for



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almost all types of banks including the RRBs /cooperative banks and even cooperative

societies both in rural and urban. There is greater scope in the medium term for this model.

For, banks to begin with resorts to this model and then move on to the other models.

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 viable and appropriate for most of the mid-sized banks

in India as also the rate of commission would be relatively higher than the referral

arrangement. This, however, is prone to reputational risk of the marketing bank. There are

also practical difficulties in the form of professional knowledge about the insurance

products. Besides, resistance from staff to handle totally new service/product could not be

ruled out. This could, however, be overcome by intensive 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 suited for majority of banks including some major urban

cooperative banks because neither there is sharing of risk nor does it require 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 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 akin to corporate agency

rather than underwriting business. Several major US banks including Wells Fargo,

Wachovia and BB &T built a large 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 range of products from competing insurers.

c) Insurance as Fully Integrated Financial Service/ Joint ventures:

Apart from the above two, the fully integrated financial service involves much more

comprehensive and intricate relationship between insurer and bank, where the bank



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functions as fully universal in its operation and selling of insurance products is just one

more function within. Where banks will have a counter within sell/ market the insurance

products as an internal part of its rest of the activities. This includes banks having wholly

owned insurance subsidiaries with or without foreign participation. In Indian case, ICICI

bank and HDFC banks in private sector and State Bank of India in the public sector, have

already taken a lead in resorting to this type of bancassurance model and have acquired

sizeable share in the insurance market, also made a big stride within a short span of time.

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 economies of scope. This may be suitable

to relatively larger banks with sound financials and has better infrastructure.

Internationally, the fully integrated bancassurance have demonstrated superior

performance. Even if the banking company forms as a subsidiary and insurance company

being a holding company, this could be classified under this category, so long as the bank

is selling the insurance products along side the usual banking services. As per the extant

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 bancassurance

seems to have emerged out of necessity in India to an extent. There is great scope for

further growth both in life and non-life insurance segments as GOI is reported have been

actively considering to increase the FDIs participation to the up to 49 per cent.

II. Product-based Classification:

i) Stand-alone Insurance Products:

In this case bancassurance involves marketing of the insurance products through either

referral arrangement or corporate agency without mixing the insurance products with any

of the banks own products/services. Insurance is sold as one more item in the menu of

products offered to the banks customer, however, the products of banks and insurance will

have their respective brands too, e.g., Karur Vysya Bank Ltd selling of life insurance

products of Birla Sun Insurance or non-life insurance products of Bajaj Allianz General

Insurance Company.

ii) Blend of Insurance with Bank Products:



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With the financial integration both within the country and globally, insurance is

increasingly being viewed not just as a stand alone product but as an important item on a

menu of financial products that helps consumers to blend and create a portfolio of financial

assets, manage their financial risks and plan for their financial security and well being. This

strategy aims at blending of insurance products as a value addition while promoting its

own products. Thus, banks could sell the insurance products without any additional efforts.

In most times, giving insurance cover at a nominal premium/ fee or sometimes without

explicit premium does act as an added attraction to sell the banks own products, e.g. credit

card, housing loans, education loans, etc. Many banks in India, in recent years, has been

aggressively marketing credit and debit card business, whereas the cardholders get the

insurance cover for a nominal fee or (implicitly included in the annual fee) free from

explicit charges/ premium. Similarly the home loans / vehicle loans, etc., have also been

packaged with the insurance cover as an additional incentive.

According to another school of thought, there are four models of bancassurance.

They are as follows:

Distribution alliance between an insurance company and a bank.

Joint venture between a bank and an insurance company.

Merger between a bank and an insurance company.

Bank builds and sells its own insurance products.

The second model is applied in SBI. SBI Life Insurance Company, a joint venture between

SBI and Cardif S.A., a leading life insurance company in France, is a predominant player

in bancassurance. Cardif is a wholly owned subsidiary of BNP Paribas, which is the Euro

zones leading bank. BNP Paribas is one of the oldest foreign banks with a presence in

India dating back to 1860. Cardif has been a pioneer in the art of selling insurance products

through commercial banks in France and in 34 other countries. SBI has contributed about

67% of Rs.601 Cr. Premium income of SBI Life in 2004-05.



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INDIVIDUAL PRODUCTS

These insurance products are marketed by Certified Insurance Facilitators. Some of the

individual products which are marketed through SBI are;

Horizon II:

SBI Lifes HORIZON II is a unique, non participating Unit Linked Insurance Plan in

Indian Insurance Industry, where you need not to be a financial market expert. This plan

offers the flexibility of Unit Linked Plan along with Automatic Asset Allocation whichprovides relatively higher returns on your money where as increasing death benefits

provides higher security to your family. It is a unique, non-participating Unit Linked

Insurance Plan.

Key features:

Twin benefit of insurance cover and market linked returns.

Hassle-free investment management of funds from inception to maturity.

Automatic Asset Allocation of funds.

Automatic rebalancing of funds at yearly intervals, free of cost.

Higher protection, to meet your family financial needs.

Automatic cover continuance.

Liquidity option after 3 years.

Facility to top up your investment kitty.

Tax benefit as per section 80C and 10(10D) of income tax act.

15 days free look period from the date on which you receive the policy document.

How does it work?



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As per the Plan and Term chosen by us , SBI Life will invest the net premium amount into

each of the funds mentioned. The number of Units of each fund will be allocated is

calculated as:

No. of Units Fund(x) = Net Investment in Fund(x)

NAV of Fund(x)

A unit of each Fund has its own price called the Net asset Value (NAV). The NAV of each

Fund is calculated on a daily basis with the following formula:

NAV= {Market Value of Investment + Current Assets - Current Liabilities & Provisions}

No of Units outstanding

Benefits:

Hassle Free Investment Management

Maturity Benefits: At the end of the term the customer will get the fund value.

Increasing Death Benefit: For all in forced policies, in case of death after

completion of age 7 your nominee will receive Fund Value + Sum Assured

otherwise fund value is payable.

What is the policy term?

Minimum years: 10, Maximum years: 40

Who can buy this product?

The people who are in good health and in the age group of 0 to 60 years. Maximum age at

Maturity is 70 years.

What is the sum assured?

Decide the amount you can put aside to be invested in Horizon II every year. Life Cover

Sum Assured(Fixed) will be (Term / 2) x AP where, AP = Annualized Premium.

Unit Plus II:

Unit Plus II Plans are an attempt to meet all your financial & insurance needs through a

single non participating product. The customers can use it the way they like. Whats more



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you get market linked returns which in the long term has always proved to give better

returns than traditional savings products. This is a non-participating individual unit linked

product. People who are in good health and in the age group of 0 to 65 can opt for these

plans.

Key features:

Unmatched Flexibility to match your changing requirement

Choice of 4 investment funds: You can change the allocation percentage when you

want, 4 switches free per annum i.e. equity, bond, growth and balanced funds.

Choice of term : Limited term or whole life

How does it work?

SBI Life Unit Plus II Plans: 2 plans depending on your premium mode:

1. Single Premium Mode: Unit Plus II Single

2. Regular Premium Mode: Unit Plus II Regular

Decide the investment amount:

Frequency Minimum Premium Maximum PremiumSingle Rs.40, 000 No Limit

Regular Rs.24, 000 p.a. No Limit

Life Cover: It depends upon the total amount you have decided to invest.

Single

PremiumMinimum Sum Assured Maximum Sum Assured

Single125%of single premium

amount

625% of single premium amount

Regular

PremiumMinimum Sum Assured Maximum Sum Assured

Term = 5 to 10

years

5 times annual premium

amount

Depends on the age*



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Term 11 years

and above

Term/2 x Annual

Premium

Depends on the age*

Whole Life Term(70 - Age at entry)/2 x

Annual Premium

No Limit

*=

Age BandMaximum Sum Assured Multiplicator

Factor

0 to 40 50 Times Of Annualized Premium




Benefits:

Maturity Benefit: At maturity, the Fund Value as on that date is paid in full.

Death Benefit: In the unfortunate event of the death

Before or the age 7 years: Fund Value is payable to the nominee.

After attaining age 7 and before 65th birthday, the beneficiary will receive higher of

Fund Value or Sum Assured less Partial Withdrawals within the last 12 calendar

months. If death occurs after age 65, the beneficiary will receive the higher of the Fund

Value or Sum Assured less all the Partial Withdrawals made in the last 12 calendar

months before attaining the age of 65+all withdrawals made after attaining the age

of 65 will be set off against the Sum Assured excluding partial withdrawals from

Top Up Amount.

Horizon II pension:

Horizon II Pension is a safe and a hassle free way to get high returns! Horizon II Pension

comes with the unique feature of Automatic Asset Allocation by means of which you truly,

dont need to be an expert to grow your money! This is a Unit Linked Pension product. If



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you are in the age group of 18 to 60(age as on last birthday) you can opt for Horizon II

pension plan.

Key features:

Horizon II Pension is the most simple unit linked pension plan; all you need to do

is:

Choose your retirement date, the plan option and the regular premium

amount.

Based on the plan option and the term opted, SBI Life will invest your

money in three different funds viz., Equity Pension Fund, Bond Pension

Fund and Money Market Pension Fund.

The funds are invested keeping in mind the term opted for and your money

is invested in safer funds as your policy approaches maturity.

Available with two options: pure pension and pension cum life cover.

No medical required to enroll for Pure Pension

No premium allocation charges from year 11 onwards.

Save tax u/s 80 CCC (1) of IT Act.

Investment Plans available:

Plan A - Dynamic Plan: Here a higher proportion of your money is

invested in equity. It is ideal for longer period of terms.

Plan B - Growth Plan: Here, the investment in equity automatically

decreases more rapidly as the funds are put into less risky options. This

leads to more balanced approach, hence lower volatility coupled with good

returns in long run.

Benefits:

Retirement Benefit: At vesting age you get a choice to withdraw up to one third of the fund

value in lump sum-tax free as per the current tax law. The remaining amount has to be used

by Annuity from either SBI life or from any other Annuity provider.



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Death Benefit:

Death during the term of policy

Option I Pure Pension - Fund value is payable to nominee.

Option II Pension with Life Cover - Fund value plus sum assured after deducting

any mortality charges due but not paid during policy year in which death occurs.

Death after Vesting age: Death Benefit depends upon the annuity option chosen.


Term = Vesting age - Age at

entry

Min Max

10 Years 52 Years

Note: Vesting Age = 50 years to 70 years (age as on last birthday)


For Pure Pension Plan Nil

For pension cum life cover plan-

Unit plus II pension:

Unit Plus II Pension plan makes sure that you have regular income after you retire and also

helps you to maintain your standard of living. This is a unit linked pension plan wherein

the policyholder chooses an investment period from 5 to 52 years for a vesting age between

50 to 70 years. You can choose to pay either single premium or pay regular premium for


Age Group 18-35 Age Group 36-45 Age Group 46-60

Min 5 times annualized premium5 times annualized

premium 1.2 Lakhs

Max 10 Lakhs 5 Lakhs


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the entire policy term. Your contributions are invested into 4 fund options as per your

choice. This is a non participating Unit Linked Pension product.

Key features:

Choice to invest & control four different funds as per your risk appetite.

Flexibility to choose between two options: pure pension and pension cum life

cover.

No medical required for Pure Pension, automatic acceptance facility.

Flexibility to increase regular contribution.

Top up payments: any amount, anytime.

15 days free look period.

How does it work?

Choose your vesting age: Any age between 50 years - 70 years.

Choose plan option

Option I Pure Pension Plan (For age group 18-65)

Option II Pension Plan with life cover (For age group 18-60)

In case you have opted for option II, your sum assured will be as mentioned below

For single premium mode:

For regular premium mode:


Age at entry Sum Assured

18-35 125 % of single premium subject to maximum SA of Rs. 10 lacs

36-45 125 % of single premium subject to maximum SA of Rs. 5lacs

46-60 125 % of single premium subject to maximum SA of Rs. 1.2 lacs


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Benefits:

Death Benefit:

During accumulation phase: If you opt for option I: Pure Pension Plan. Fund value

will be paid in lump sum to nominee. If you opt for option I: Pure Pension Plan

with life cover. The higher of fund value or sum assured will be paid in lump sum

to nominee. Guaranteed additions by way of free allocation of units to increase your

retirement kitty.

On Vesting: It's your income; you decide how it works for you. You have choice

and flexibility. You can take up to one third of the fund value in lump sum.

During Annuity Phase: Balance amount has to be used to purchase annuity. The

rate at which the amount at vesting date will be converted to an annuity is not

guaranteed and will be based on the prevailing immediate annuity rates under the

relevant annuity option at the vesting date.

Tax benefit: Save tax u/s 80 CCC (1) of IT Act.


Term = Vesting Age - Age at Entry


Age at entry Sum Assured

18-35 5 or 10 times first annualized premium subject to maximum SA of

Rs.10 Lakhs

36-45 5 or 10 times first annualized premium subject to maximum SA of

Rs.5 Lakhs

46-60 Rs.1.2 lakhs

Minimum Years Maximum Years

5 Years 52 Years


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If you are in the age group of 18 to 65 you can opt for Unit Plus II pension plan without lifecover. For Unit Plus II pension plan with life cover it should be between 18-60 years.

Lifelong pension:

Life expectancy is improving rapidly. People live longer. You cannot work throughout

your life. You will have to retire from work. In the post retirement period you have lot of

time for yourself. You would like to do things you have not done while you were working.

You need to have a comprehensive plan to meet your post retirement financial needsensuring complete peace of mind. This is a Pension product. If you are in the age group of

18 years (age as on last birthday) to 65 years (age as on last birthday) you can opt for pure

pension plan. For Pension cum Life Cover, it is 18 years (age as on last birthday) to 60

years (age as on last birthday).

Key features:

A maximum of Rs.1,00,000 p.a. paid as a contribution on a pension plan is fullydeductible from the taxable income (within the max. ceiling Rs.1 lakh )

Minimum Guaranteed returns of 4% p.a. (compounded annually) on your Personal

Pension Account (till 31st March 2010) + Vested bonus.

It helps to accumulate enough savings to meet the old age needs and look for a

reliable and enduring pension payment.

It is an extremely flexible plan:

Choice of the contribution amount you want depending on your premium

paying capacity.

You may exercise the Top-up facility whenever by paying additional

amount to increase your retirement kitty, irrespective of contribution

payment mode.



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Convenient Contribution payment mode monthly, quarterly, half-yearly,

yearly and single contribution is also available.

Choice of the choosing your own retirement age.

Postponing/ Preponing to a convenient date, the decision for receiving the

Pension Benefits.

Contribution holiday available from year 4 onwards.

The total/balance amount (after withdrawal from PPA, if any) can be

utilized in seeking immediate annuity.

Free to choose annuity from either SBI Life or other insurance companies.

At Vesting Age you have multiple choices of Pension/ Annuity options including

Joint Life Time Annuity.

On maturity you have a choice to withdraw up to 33% from your Personal Pension

Account in a lump sum. This withdrawal amount is tax-free as per the current fiscal

law.

Helps you to utilize all alternatives of tax savings today and also plan for a worry

free tomorrow.

In Pension cum Life Cover plan, you have the facility of Automatic Cover

Maintenance, which ensures that the cover remains in force even when you miss the

premium payments. This facility is available after the first three years of the term.

In Pension cum Life Cover plan, the life cover acceptance is based on a simple

medical questionnaire without any Medical examination

Rebates for Annual, Semi- Annual mode of premium and on high Contribution

amount. Enjoy financial independence when you retire.

15 days Free Look Period from the date on which you receive the policy

documents.

How does it work?

Here you pay your contributions for a selected term (accumulation period). Your

contribution net of administration charges in your Personal Pension Account with a

guaranteed rate of 4% (compounded) per annum till March 2010 depending on the



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financial market, additional vested bonus may be declared from the age to start receiving

pensions and also have the flexibility in the choice of annuity options and provider.

Swadhan:

Life has its uncertainties and risks. All that you are interested in is how best to afford a

secure future for your loved one. We wish for a low premium insurance policy that not

only provides security to our loved ones but also returns back the premium paid. It's a

Traditional Term Assurance Policy with refund of part/total basic premium paid at the end

of the term to the policyholder.

Key features:

Protection at affordable premium.

Guaranteed refund of basic premium paid on Survival at the end of the term,

depending upon the term of the policy.

5% rebate for Female lives

Rebate on High Sum Assured

Flexible benefit premium paying mode

Free look period of 15 days

How does it work?

You can take a cover ranging from 5-10 years. In the unfortunate event of death, the

nominee would receive the entire sum assured as a lump sum payment. If you survive the

entire term, you would be eligible to a refund of premiums depending upon the term of

policy. For example, if your policy is for 5 years, you'd be eligible for refund of 50% of the

total premiums paid; for 6 years, the refund would be 60%, and so on. Hence, if you'vetaken a policy for 10 years, you'd receive 100% of your premiums back as refund.

Benefits:



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Maturity benefit: If you survive for the entire term of the plan, you would be eligible to a

refund of the premiums depending upon the term of the policy.

Death benefit: In the event of claim, your nominee would receive full Sum Assured



Minimum Rs.3,00,000 (in multiple of Rs.10,000)

Maximum Rs.1 Crore

Shield:


Term

%age of Basic

Premium refunded

5 years 50%

6 years 60%

7 years 70%

8 years 80%

9 years 90%

10 years 100%


5 years 10 years


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We want our family to have all the good things in life. Life is full of uncertainties and risk.

To ensure that these uncertainties do not shatter the dreams you have for your family.

Shield is a traditional pure risk policy (with no maturity benefits) that offers you a

substantial life cover at a very low cost. It is one of the most preferred individual insurance

products.

Key features:

It offers you life insurance cover at the lowest cost for a selected term.

It is available in 3 options to suit your requirement.

Level Premium throughout the chosen term with increasing Sum Assured,

depending on the option chosen.

Tax benefit u/s 80 C and 10 (10 D) of IT Act

Attractive rebate for Female lives.

Attractive Rebates are offered for Annual / Semi- Annual mode of Premium

payment and High Sum Assured.

Convenient premium payment options: Single and Multiple premium payment.

15 days Free Look Period from the date on which you receive the policy

documents.

How does it work?

Under this product, you can opt for gradual increase of cover @ 5% every year or for

substantial increase of cover @ 50% for every five years. Under both the options, you pay

the same amount of premium throughout the entire term of the policy. If you opt for an

increasing cover now you wouldn't require a fresh policy later. This will avoid the hassles

of taking another insurance policy, paying more premiums and meeting the medical

requirements of the insurer. We recommend that you should choose either of the following

options.

Sum Assured Increases by 5% Per Annum

Sum Assured Increases by 50% Every 5 Years



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Benefits:

Death Benefit: Depending on the cover chosen, the nominee will receive the sum

assured under this policy

Maturity Benefit: No survival benefit available at the end of the term.

Other Optional Benefits:

Accidental Death and Accidental Total Permanent Disability Rider: In case

of death due to an accident, the nominee gets the Sum Assured under this

rider. If the policyholder is involved in an accident, resulting in Total

Permanent Disability, he/she will get Sum Assured under this rider in 10

equal annual installments; He/she will exit from all the rider covers

thereafter, but continue to be covered for basic cover on receipt of further

premium due, if any.

Premium Waiver Benefit Rider: Under this rider the policy holder need not

pay future premiums for the base product, if he/she suffers from Total and

Permanent Disability due to an accident after the rider is opted for.





5 years 25 years

Range of Sum

Assured

Sum Assured Increases by

5% Per Annum

Sum Assured Increases by

50% Every 5 Years

Level Cover

Minimum Sum

Assured

Rs.3 lakhs Rs.3 lakhs Rs.3 lakhs

Maximum Sum

Assured

Rs.10 Crores Rs.8 Crores Rs.25 Crores


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Keyman:

Keyman is a key member or staff of the organization who is a major contributor to its

growth and profit and whose absence may affect the continuity of the business. Keyman

Insurance is taken by the Company on the life of the key member or staff. The main

objective of Keyman Insurance is to compensate for the financial losses suffered following

the death of key member or staff of the organization. The aim is to indemnify the company

of these losses and to allow business continuity. All premiums paid for securing a Keyman

life insurance policy are treated as business expenditure u/s 37 (1). Shield plan is available

for the purpose of Keyman insurance. It is a pure term insurance Plan.

Purpose of keyman: It protects the organization against any of the following losses;

The loss of customers or sales.

The loss of day -to -day specialized skills.

The cost of recruiting and training the suitable replacement.

Delay or cancellation of any business project that keyman was associated with.

The loss of opportunity for future explanation.

Recall of existing loan guaranteed by the keyman.

Tax benefits: Companies may claim the premium paid under Keyman insurance as a

business expenses under section 37(1) of the income tax act. As per the finance bill 1996,

the amount received under a Keyman insurance policy will not exempt from tax under

Section 10(10D) of income tax act. The proceeds of policy will be treated as income under

section 28(vi) of income tax act.

In the event of the policy being assigned to the Keyman, the proceeds of the policy

including bonus will be treated as "Profit in the Lieu of Salary" under section 17 (clause

17) of Income Tax Act.




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Organizations buy this product to protect the organization against the cost caused by the

death of key member of organization.


Sudarshan:

Sudarshan is an Endowment Policy designed to provide savings and protection to you and

your family. You can save regularly for the future. Thus at the end of the plan, you will

receive a substantial amount of savings along with the accumulated bonuses declared. At

the same time, your family will be protected for death risk for the full Sum Assured. It is a

traditional endowment plan i.e. saving - cum protection product.

Key features:

It offers you the option of tailoring your policy according to your requirement and

needs, by opting for various extra covers (Riders) that are offered.

This is a unique product that offers you an innovative cover (plan B) which helps

you to protect your savings against 'the financial consequences of inflation' with

constant premium for the entire duration of the plan.

It gives you protection against unfortunate terminal or dreaded illness.

It is an insurance plan which could also act as a hedging instrument.

With this plan you can plan your children's future education, marriage expenses or

even your own retirement - in a most flexible manner.

How does it work?


Minimum Maximum should be lower of

10,00,000 5 times the average net profit of the company for past 3 years

3 times the average gross profit of the company for last 3 years

Bank assurance Applied @ Sbi Project Report Mba Finance

Documents

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