BANCASSURANCE IN SBI

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


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
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 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:
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 year’s 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;
• 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 banks have
been looking towards bancassurance, a mechanism of distribution of insurance
products through a bank’s 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.



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 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 bird’s-eye view of insurance sector reforms
No Date Reforms
1 September Incorporation of LIC and merger of 245 private life insurers,
1956 nationalized in Jan 1956.
2 January 1972 Nationalization of general insurance (106 private insurers)
January 1973 Incorporation of GIC (General Insurance Corporation)
January 1974 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 IRDA Bill introduced in Parliament & referred to the standing
1996 committee.
6 August 1997 IRDA is withdrawn following opposition to foreign participation
7 November Government of India clears greater autonomy to LIC and GIC.
1997
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



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. GIC’s 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 nineteenth
century 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.



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.



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.



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.



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 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 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 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
economic development. 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. 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
Shri O.P. Bhatt
1. 19(a)
Chairman
Shri T.S. Bhattacharya
2. 19 (b)
MD & GE (CB)
Shri S.K. Bhattacharyya
3. 19(b)
MD & CC&RO
4. Shri Suman Kumar Bery 19(c)
5. Dr. Ashok Jhunjhunwala 19(c)



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 India’s 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 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.



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 a
period 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’
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, the
margins 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 India’s 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.



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,



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 bank’s
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:-



If we are looking around the world then we can see that European countries are doing
better than others where hardly 20% of us banks are selling insurance in 1998 against
70% to 90% in many European countries. Market penetration of bancassurance in new
life business in Europe ranges between 30 % in UK to nearly 70% in France. Almost
100% banks in France are selling insurance products. In 1991 Nationale Nederlanden of
Netherlands merged with Post Bank, the banking subsidiary of the post office to create
the ING group a new dimension to the bancassurance is harnessing the databank of the
post office as well. CNP, the largest independent insurance company in France has
developed its products distribution through post offices. The merger of Winterthur, the
largest swiss insurance company, with Credit suisse and Citibank with Travelers group
have resulted in some of the largest financial conglomerates in the world. Despite the
phenomenal success of bancassurance in Europe, properly and casualty products have not
made much inroads. In Spain, Belgium, Germany and France more than 50% of all new
life premium is generated by bancassurance. A recent study try Boston consulting Group
and Bank Administrative Institute in USA claims that if bank made a major commitment
to insurance and a more narrowly targeted commitment to investors within 5 years they
could increase retail revenues by nearly 50%. Banks existing infrastructure enables them
to operate at expense level that is 30% to 50% lower than those of traditional insurers.

Bancassurance in India SWOT analysis:-
Although banks and insurance companies are yet to exchange their wedding rings
bancassurance is already in some form in India. Banks are selling personal accident and
baggage insurance for its credit card members, issued mortgage linked insurance products
like fire, motor or cattle insurance to their customers and establishing face to face
relationship with their customers by leveraging their existing capabilities. In order to
implement the bancassurance model in India a lot of steps should be taken-
a) High capital investment in the infrastructural development particularly in IT and Tele
Communications will have to be required.
b) A call centre will have to be created.
c) Top professionals will have to be hired.
d) R& D cell will have to be created to generate new ideas and products.



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:-
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, 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 MODELS
According 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 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
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 FDI’s 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 bank’s 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:
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 bank’s
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 zone’s 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.



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 Life’s 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 which
provides 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?
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. What’s more
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 Premium
Single 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
Minimum Sum Assured Maximum Sum Assured
Premium
125%of single premium
Single 625% of single premium amount
amount

Regular Minimum Sum
Maximum Sum Assured
Premium Assured



Term = 5 to 10 5 times annual Depends on the age*
years premium amount
Term 11 years Term/2 x Annual Depends on the age*
and above Premium
Whole Life (70 - Age at entry)/2 x No Limit
Term Annual Premium

*=
Maximum Sum Assured Multiplicator
Age Band
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, don’t need to be an expert to grow your money! This is a Unit Linked Pension



product. If 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.



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 atMin Max
entry 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-

Age Group 18-35 Age Group 36-45 Age Group 46-60
5 times annualized
Min 5 times annualized premium
premium 1.2 Lakhs
Max 10 Lakhs 5 Lakhs

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 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:

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

For regular premium mode:

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

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

Minimum Years Maximum Years
5 Years 52 Years




If you are in the age group of 18 to 65 you can opt for Unit Plus II pension plan without
life cover. 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
needs ensuring 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 fully
deductible 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.
 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
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've taken a policy for 10 years, you'd receive 100% of your premiums back as refund.

Benefits:

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.



%age of Basic
Term
Premium refunded
5 years 50%
6 years 60%
7 years 70%
8 years 80%
9 years 90%
10 years 100%

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


5 years 10 years


Minimum Rs.3,00,000 (in multiple of Rs.10,000)
Maximum Rs.1 Crore

Shield:

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

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 Sum Assured Increases by Sum Assured Increases by Level
Assured 5% Per Annum 50% Every 5 Years Cover
Minimum Sum Rs.3 lakhs Rs.3 lakhs Rs.3 lakhs
Assured
Maximum Sum Rs.10 Crores Rs.8 Crores Rs.25
Assured Crores

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.


Organizations buy this product to protect the organization against the cost caused by the
death of key member of organization.




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

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?

• Fixed Sum Assured Plan: Allows you to build a regular saving plan that gives you a
secure amount at the end of a fixed period plus a bonus. In the unfortunate event of death
before maturity, the nominee would stand to receive the Sum assured and the bonus
accrued till that date.



• Increasing Sum Assured Plan - the COLA Option: The Cost Of Living Adjustment
(COLA) option is so called because it serves as an automatic hedge against inflation. It
allows you to increase the Sum Assured automatically by paying an additional premium
compared to the Fixed Sum Assured Plan. Moreover, the life cover also automatically
increases during the period as added protection to the family.

Benefits:

Maturity Benefit: Depending upon the plan option chosen:

•Fixed Sum Assured (Plan A) Basic Sum Assured along with Vested Bonus is payable

•Increasing Sum Assured (Plan B) Increased Sum Assured @ 5% p.a. along with Vested
Bonus is payable

Death Benefit: In the unfortunate event of death of the Life Assured, depending upon the
plan option chosen:

•Fixed Sum Assured (Plan A) The Sum Assured along with Vested Bonus is payable to
your nominee.

•Increasing Sum Assured (Plan B) Increased Sum Assured @ 5% p.a along with Vested
Bonus is payable to your nominee.


Minimum Maximum
Rs.25,000 Rs.1 Crore
Scholar II:

As a caring parent you would always want your child to get the very best. Is there a way
to protect your children against life’s risks? Is there a way to make tomorrow safe for
them? Therefore this is the time when careful financial planning can help you fulfill the
aspirations that you have for your children’s. SCHOLAR II is designed to protect your
child’s future educational needs. It is a traditional participating plan. Anyone between 18



to 60 years of age(as on last birthday) with a child between 0 to 15 years can buy this
product.

Key features:

• Twin benefit of saving for your child's education and securing a bright future
despite the uncertainties of life.
• Full risk cover throughout the policy term irrespective of payment of survival
benefits installments.
• Option to receive the installments in lump sum at the due date of first installment
of Survival benefit.
• Attractive rebate for Female lives and High Sum Assured.
• 15 days Free Look Period.

Benefits:

Guaranteed payment at regular intervals. When the child attains 18 years of age, the
parent has an option of:

Receiving the Sum Assured in 4 installments:

Age Guaranteed Benefit Payment
18 years 25 % of Sum Assured
19 years 25 % of Sum Assured
20years 25 % of Sum Assured
21 years 25 % of Sum Assured + Vested
Bonus *
Receiving the Survival Benefits in a
single installment along with the Vested Bonus (Policy terminates thereafter). Vested
bonus is the total amount of bonus accrued till date, under the policy.

Death Benefit: In the event of unfortunate incident of your early death during the term of
the plan, your child’s future remains secured in 3 ways:



 Child future educational needs: 25% of Sum Assured is payable in 4 equal
installments when the child attains the age 18 years to 21 years. This ensures the
child's higher educational needs are met.
 Immediate Payment: The nominee receives the Sum Assured along with the
bonus declared until that date.
 All future basic premiums need not be paid: Ensuring that your family is not
financially burdened in your absence.

Tax Benefits: Tax benefit u/s 80 C and 10 (10 D) of IT Act. Premiums paid for Critical
Illness Benefit qualify for tax exemption under Sec 80D.


The premium payment term depends on the age of the child and ends when the child
attains the age 18 years. You are covered till the child attains the age 21 years.


Minimum Maximum
Rs.500000 Rs.1 Crore

Setubandhan:

A unique Life Insurance bond that helps you, the NRI living abroad, build a bridge
between you and your dear ones back in India. It’s a traditional Investment - cum - Life
Insurance opportunity.

Key features:

• Guaranteed 5% annual returns(Simple) on your investment with benefit of Single
Premium payment.
• Savings-cum-Protection plan for two terms of 5 or 10 years.



• Optional Critical Illness cover against six major ailments like heart attack, cancer
etc.
• Facility of repatriation at prevailing exchange rates.
• Optional life insurance cover for dependents up to Rs.10 lakhs with return of
premium.
• 15 days look period.

How does it work?

Setubandhan is an insurance bond for subscription by NRIs as well as by domestic
residents in India. It is a life insurance policy that helps to build a bridge between you as
the NRI living abroad and your dear ones back home in India.

Benefits:

• Base Policy for NRIs: Guaranteed 5% annual additions(Simple) on Sum Assured
with benefit of Single Premium payment In the event of death, the Sum Assured
as increased by the annual addition on the date of death will become payable.
Upon survival, the Sum Assured with total additions during the period will be
payable.
• Optional Life Cover for Dependant: Term insurance cover for a dependant living
in India, subject to a minimum sum assured of Rs.3 lakhs and maximum Rs.10
Lakhs. Premiums are payable annually. `Dependant’ will mean spouse, and
parents not above the age of 55 at the time of entry. Term insurance premium will
be refundable at the end of the term upon survival of the life covered (Swadhan).
Full refund of premium for a 10-year term and 50% for a 5-year term.


Minimum Sum Assured: Rs.3 lakhs
Maximum Sum Assured: Rs.1 Crore



Sanjeevan supreme:

Life is all about change and with rising costs and economic instability, you may not be
sure about your future incomes. You need a product that offers you a life cover for the
term of your choice + At the same time does not burden you with liability to pay
premiums for the entire term + Cash inflow at regular intervals. It is a Traditional Saving
Plan with added advantage of life cover and guaranteed cash inflow at regular intervals.

Key features:

• The plan has a number of money back options specially suited to your needs.
• The cover is available at competitive premium rates.
• It has guaranteed cash inflows which can meet your various financial obligations.

How does it work?

SBI Life Money Back is a saving plan with added advantage of life cover and cash inflow
at regular intervals. This plan is designed for individuals who want to plan for various
financial obligations at specified times in life. Keeping your convenience in mind, we
have designed four plan options: for 10, 15, 20 or 25 years.



Term of Premium Growth/Deferment Money Back Total Term of The
the Plan Payment Term Period Period Policy(2+3+4)
Plan A 6 Years 4 Years 5 years @ 20% 15 years
Sum Assured p.a.
Plan B 6 Years 4 Years 10 years @ 10% 20 years
Sum Assured p.a.
Plan C 10 Years 5 Years 5 years @ 20% 20 years
Sum Assured p.a.
Plan D 10 Years 5 Years 10 years @ 10% 25 years
Sum Assured p.a.

Benefits:

• You can pay off all premiums over a short period of time and be free from paying
premiums for the rest of the policy term, while enjoying all the benefits for the
entire policy term.
• Enjoy the benefits of bonus additions for the entire term of the policy.
• Convenient premium payment options: Single and Multiple premium payment.
• Maturity Benefit: At the end of the growth period, you would receive guaranteed
payout in 5 years or 10 years, depending on the plan option chosen by you. The
bonuses declared by the company get accumulated for the entire term of the plan
and you would receive total bonus along with the final installment of Survival
benefit.

• Death Benefit: In the unfortunate event of death during the term of the plan, the
nominee would receive sum assured + vested bonuses, besides receiving of the
survival benefit already paid.

Exclusions applicable to the Basic cover: Suicide within the first year.



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