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Bank assurance in India - Some Issues

The dissimilarity in working style and culture of the banks and insurance sector needs greater appreciation. Insurance is a ‘business of solicitation’ unlike a distinctive banking service, it requires great drive to ‘sell/ market the insurance products. It should, however, be recognized that ‘bancassurance’ is not plainly about selling insurance but about changing the attitude of a bank. Moreover, in India since the majority of the banking sector is in public sector and which has been widely disparaged for the lethargic approach and poor quality of customer service, it needs to refurbish the blemished image. Else, the bancassurance would be not easy to succeed in these banks. Studies have revealed that the basic attitudinal inappropriateness on the part of employees of banks and insurance companies and the perception of customers about the poor quality of banks had led to failures of bancassurance even in some of the Latin American countries. There are also glitches in the system of bancassurance approach in the form of ‘conflict of interests’, as some of the products offered by the banks, viz., ‘term deposits’ and other products which are primarily aimed at long term savings/ investments can be very similar to that of the insurance products. Banks could as well feel apprehension about the possibly of substitution effect between its own products and insurance products and more so, as a number of insurance products in India come with an added attraction of tax incentives. In case the Bancassurance is fully incorporated with that of the banking institution, it is suitable only for larger banks; however, it has other allied issues such as putting in place ‘proper risk Management techniques’ relating to the insurance business, etc. As there is a great deal of difference in the approaches of ‘selling ofinsurance products’ and the usual banking services- thoroughunderstanding of the insurance products by the bank staff coupled withextra devotion of time on each customer explaining in detail of eachproduct’s intricacies is a prerequisite.

Moreover, insurance products havebecome increasingly complex over a period of time, due to improvisationover the existing products as well as due to constant improvement of newproducts, emanating from the excessive competition adding to even moredifficulties in comprehension of the products and marketing by the bankstaff. These can result in resistance to change and leading to problems relating to industrial relations.Unlike, the banking service, there is no guarantee for insuranceproducts that all efforts that a bank staff spends in explaining to acustomer would clinch the deal due to the very nature of the insurance products. This frustration of the bank staff has the danger of spillover effect even on their regular banking business. Bankers in India are extremely naïve in insurance products as there were no occasions in the past for the bankers to deal in insurance products, therefore they require strong motivation of both monetary and non monetary incentives. This would be more so in the emerging scenario due to complex innovations in the field of insurance / pension products at a rapid pace with the entry of a number of foreign insurance companies with vast experience in the developed countries’ framework. In view of the above, reorientation of staff in the public sector banks in particular, to be less bureaucratic and more customer friendlier would indeed be a challenging task, albeit it is a prerequisite for the success of bancassurance. With the financial reforms and technological revolution embracing the financial system, there has been a great deal of flexibility in the Mind set of people to accept change. The above outlined problems need not, however, deter the banking sector to embark on bancassurance as any form of resistance from the bank employees could be tackled by devising an appropriate incentive system commensurate withIntensive training to the frontline bank staff.

Deposits and Bank Accounts
Fixed deposits