a study on bancassurance - final year proj

INTRODUCTION

INTRODUCTION

The business of banking around the globe is changing due to

integration of global financial markets, development of new

technologies, universalization of banking operations and

diversification in non-banking activities. Due to all these movements,

the boundaries that have kept various financial services separate from

each other have vanished. The coming together of different financial

services has provided synergies in operations and development of new

concepts. One of these is bancassurance.

Bancassurance simply means selling of insurance products by

banks. In this arrangement, insurance companies and banks undergo a

tie-up, thereby allowing banks to sell the insurance products to its

customers. This is a system in which a bank has a corporate agency

with one insurance company to sell its products. By selling insurance

policies bank earns a revenue stream apart from interest. It is called as

fee-based income. This income is purely risk free for the bank since

the bank simply plays the role of an intermediary for sourcing

business to the insurance company.

It has its genesis decades ago in France, where this channel

today is the predominant source of insurance business. It has grown at

different places and taken shapes and forms in different countries

depending upon demography, economic and legislative prescription in

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that country. In some countries, bancassurance is still largely

prohibited, but it was recently legalized in countries such as the

United States, when the Glass-Steagall Act was repealed after the

passage of the Gramm-Leach-Bliley Act.

Bancassurance is a new buzzword. It originated in India in the year

2000. Following the recommendations of First Narasimham

Committee, the contemporary financial landscape has been reshaped.

Thus, present-day banks have become far more diversified than ever

before. Therefore, their entering into insurance business is only a

natural corollary and is fully justified too as ‘insurance’ is another

financial product required by the bank customers.

From the view point of insurance industry also the importance of

bancassurance was felt necessary. With the increased pressures in

combating competition, companies are forced to come up with

innovative techniques to market their products and services. At this

juncture, banking sector with it's far and wide reach, was thought of as

a potential distribution channel, useful for the insurance companies.

That’s where the bancassurance came into existence. Thus,

bancassurance is poised to become a key determinator / differentiating

factor in the Insurance industry as well.

Given India’s size as a continent it has, however, a very low

insurance penetration and low insurance density. The penetration level

of life insurance in the Indian market is abysmally low at 2.3% of

GDP with only 8% of the total population currently insured. As

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http://en.wikipedia.org/wiki/United_States

http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act

http://en.wikipedia.org/wiki/Glass-Steagall_Act

INTRODUCTION

opposed to this, India has a well-entrenched wide branch network of

banking system, which only few countries in the world could match

with. It is predicted by experts also that in future 90% of share of

premium will come from Bancassurance business only. And almost

half of the population likely to be in the 'wage earner' bracket by 2010

that there is every reason to be optimistic that bancassurance in India

will play a long inning.

Currently there are more and more exchange of wedding rings

between banks and Insurance Company for better business prospect in

future. With the enoromous benefits for banks like increase in

revenue, return on asset, customer retention, better reputation etc., the

bancassurance is going to be a big revolution in the banking industry.

It is against this backdrop an attempt is made to analyse the financial

performance of the HDFC bank in bancassurance so far and to find

out the areas where they can make use of and still need to focus in

order to make HDFC bank to play a vital role in the bancassurance

industry.

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1.1 MEANING, DEFINITION AND

CONCEPT

MEANING:

Bancassurance is a combination of two words ‘Banc’ and

‘assurance’ signifying that both banking and insurance products and

service are provided by one common corporate entity or by banking

company with collaboration with any particular Insurance company.

In concrete terms bancassurance, which is also known as Allfinanz -

describes a package of financial services that can fulfill both banking

and insurance needs at the same time.

It is the provision of insurance (assurance) products by a

bank. The usage of the word picked up as banks and insurance

companies merged and banks sought to provide insurance, especially

in markets that have been liberalized recently. In its simplest form,

Bancassurance is the distribution of insurance products through the

Bank’s distribution network.. It is a phenomenon wherein insurance

products are offered through the distribution channels of the banking

services along with a complete range of banking and investment

products and services. Bancassurance tries to exploit synergies

between both the insurance companies and banks.

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DEFINITION:

The term first appeared in France in 1980, to define the sale

of insurance products through banks’distribution channels (SCOR

2003).

The Life Insurance Marketing and Research Association’s

(LIMRA’s) insurance dictionary defines bancassurance as “the

provision of Life insurance services by banks and building

societies”.

Alan Leach, in his book, “European Bancassurance –

Problems and prospects for 2000”, describes bancassurance as

“the involvement of banks, savings banks and building societies in the

manufacturing, marketing or distribution of insurance products”.

According to IRDA, ‘bancassurance’ refers to banks acting as

corporate agents for insurers to distribute insurance products.”

Literature on bancassurance does not differentiate if the

bancassurance refers to selling of life insurance products or non-life

insurance products.Accordingly, ‘bancassurance’ is defined to mean

banks dealing in insurance products of both life and non-life type in

any forms.But in this research the focus is entirely concentrated

towards life insurance. It is also important to clarify that the term

bancassurance does not just refer specifically to distribution alone.

Other features, such as legal, fiscal, cultural and/or behavioural

aspects also form an integral part of the concept of bancassurance

(SCOR 2003).

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There are many definitions of bancassurance and, in essence it

does depend upon the model used, and the stage of development.

However, the definition of a fully developed model that is most

commonly used is: “'Manufacturing and distributing cost effectively

banking and insurance products to a common customer base”.

CONCEPT:

This concept gained importance in the growing global insurance

industry and its search for new channels of distribution.However, the

evolution of bancassurance as a concept and its practical

implementation in various parts of the world, have thrown up a

number of opportunities and challenges.

Bancassurance is a relatively new concept in the global

stage.unlike banks and insurerswhich have been around in one form or

the another for centuries,bancassurance has only been around for a

few decades. The concept of bancassurance was emerged in the

western world when banks began to get involved in marketing of

insurance business. From a purely historical perspective, many regard

Barclay’s Life, set up in 1965 in the UK as an insurance subsidiary of

the eponymous bank, as the pioneer of bancassurance. But the term

bancassurance came into existence in France after 1980 to define the

sale of insurance through an intermediary bank.

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It has reared its head in France in the late 1970’s,motivated by

among other things changing customer needs due to an inadequate

pension scheme that existed at that time. As the governments can no

longer maintain the funding that people have begun to take a more

active role in their future entitlements by looking at alternatives to

pensions. Bancassurance provides not only provides an alternative to

pensions but also caters to the current taste of customers, which is no

longer satisfied by the traditional products offered by the insurers. As

bancassurance allowed the banks to move away from income

generated by the interest spreads it is viewed as a solution to alleviate

the problem of poor consumer savings, squeezed margins. Thus

lackluster pension schemes, poor consumer savings, squeezed

margins, the need for one stop shop delivery for all financial services

among the consumers, increasing importance of strategic alliance has

all led to the growth of bancassurance in Europe. With the success of

bancassurance model in Europe, the bancassurance, which was only a

European phenomenon, is becoming popular in other continents also

Bancassurance seems to have made the greatest impact in

France. Almost 100% of the banks in France are selling insurance

products. It is claimed that the 55% to 60% of the life insurance

business in France had come through banks. In Portugal and Spain it

was over 70%. In U.K it is about 30%. In Argentina, Brazil, Chile,

Colombia and Mexico also the bancassurance is becoming popular.

Hardly 20 % of the United states banks are selling insurance products

as only recently the Glass steagell act was repealed which has

prohibited the banks from entering into the financial services. In Asia:

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Singapore, Taiwan and Hong Kong have surged ahead in

Bancassurance then that with India and China taking tentative step

forward towards it. In Middle East, only Saudi Arabia has made some

feeble attempts that even failed to really take off or make any change

in the system.

RELEVANCE OF BANCASSURANCE IN THE INDIAN

FINANCIAL SECTOR

i)) Integration of the financial service industry in terms of banking,

securities business and insurance is a growing worldwide

phenomenon. The Universal Banking concept is evolving on these

lines in India.

ii) Banks are the key pillars of India’s financial system. Public have

immense faith in banks.

iii) Share of bank deposits in the total financial assets of households

has been steadily rising.

iv) Indian Banks have immense reach to households. Total of 65700

branches of commercial banks, each branch serving an average of

15,000 people.

v) Banks enjoy considerable goodwill and access in the rural

regions.There are 32600 branches in rural India (about 50% of total),

and 14400 semi-urban branches, where insurance growth has been

most buoyant.196 exclusive Regional Rural Banks in deep hinterland.

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vi) Banks have enormous retail customer base.Share of ‘individuals’

as a category in bank accounts is steadily increasing.Rural and semi

urban bank accounts constitiute close to 60% in terms of number of

accounts,indicating the number of potential lives that could be

covered by insurance with the upfront involvement of banks.

vii) Banks world over have realized that offering value-added services

such as insurance, helps to meet client expectations. Competition in

the Personal Financial Services area is getting `hot’ in India that

Banks can retain customer loyalty by offering them a vastly expanded

and more sophisticated range of products. Insurance distribution can

also help the bank to increase the fee-based earnings to a large

extent.

viii) Fee-based selling helps to enhance the levels of staff productivity

in banks.

This is vitally important to bring higher motivation levels in banks in

India.

ix) Banks can put their energies into the small-commission customers’

that insurance agents would tend to avoid. Banks’ entry in distribution

can help to enlarge the insurance customer base rapidly. This helps to

popularize insurance as an important financial protection product.

x) Bancassurance helps to lower the distribution costs of insurers.

Acquisition cost of insurance customer through bank is low. Selling

insurance to existing mass market banking customers is far less

expensive than selling to a group of unknown customers. Experience

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in Europe has shown that bancassurance firms have a lower expense

ratio. This benefit could go to the insured public by way of lower

premiums.

xi) Banks have an important role to play in the pension sector when

deregulated.Low cost of collecting pension contributions is the key

element in the success of developing the pension sector. Money

transfer costs in Indian banking is low by international

standards.Portability of pension accounts is a vital requirement which

banks can fulfill, in a credible framework.

REASONS FOR BANKS TO ENTER INTO BANCASSURANCE

The main reasons why banks have decided to enter the

insurance industry area are the following:

Intense competition between banks, against a

background of shrinking interest margins, has led to

an increase in the administrative and marketing costs

and limited the profit margins of the traditional

banking products. New products could substantially

enhance the profitability andincrease productivity.

Financial benefits to a bank performance can flow

in a number of ways, as briefly outlined below:

- Increased income generated, in the form of

commissions and/or profits from the business

(depending upon the relationship)

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- Reduction of the effect of the bank fixed

costs, as they are now also spread over the life

insurance relationship.

- Opportunity to increase the productivity of

staff, as they now have the chance to offer a

wider range of services to clients

Customer preferences regarding investments are

changing. For medium-term and long-term

investments there is a trend away from deposits and

toward insurance products and mutual funds where

the return is usually higher than the return on

traditional deposit accounts.This shift in investment

preferences has led to a reduction in the share of

personal savings held as deposits, traditionally the

core element of profitability for a bank which

manages clients money. Banks have sought to offset

some of the losses by entering life insurance

business.Life insurance is also frequently supported

by favourable tax treatment to encourage private

provision for protection or retirement planning. This

preferential treatment makes insurance products

more attractive to customers and banks see an

opportunity for profitable sales of such products.

Analysis of available information on the customer

financial and social situation can be of great help in

discovering customer needs and promoting or

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manufacturing new products or services.Banks

believe that the quality of their client information

gives them an advantage in distributing products

profitably, compared with other distributors (e.g.

insurance companies).

The realization that joint bank and insurance

products can be better for the customer as they

provide more complete solutions than traditional

standalone banking or insurance products.

Banks are experiencing the increased mobility of

their customers, who to a great extent tend to have

accounts with more than one bank. Therefore there

is a strong need for customer loyalty to an

organization to be enhanced.

Client relationship management has become a key

strategy. To build and maintain client

relationships,banks and insurers are forming

partnerships to provide their clients with a wide

range of bank and insurance products from one

source.

It is believed that as the number of products that a

customer purchases from an organization increases

the chance of losing that specific customer to a

competitor decreases.

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WHY IS BANCASSURANCE MORE SUITED TO LIFE

INSURANCE PRODUCTS?

Traditionally, much fewer non-life insurance products are

distributed through bancassurance than life insurance products. There

are several reasons for this:

The main reason may be the complementary nature of life✔

insurance and banking products: bank employees are already familiar

with financial products and quickly adapt to selling insurance-based

savings or pension products;

On the other hand, the non-life market requires special✔

management and selling skills, which are not necessarily prevalent in

bancassurance. In addition, such competencies require significant

investment in training and motivation, and therefore additional costs;

Life insurance products are generally long-term products, which✔

require customers to have complete confidence in the institution that

invests their money. And we now know that, in many countries, banks

have a better image and are more trusted than insurance companies;

Bank advisers can use their knowledge of their customers’✔

finances to target their advice towards specific needs. This is a major

advantage in life insurance and less important in personal injury

insurance;

Some professionals also refer to the claims management aspect of✔

personal injury insurance, which could have a negative impact on

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brand image. This would seem to explain why for a long time

bancassurance operators hesitated to offer these types of product.

ADVANTAGES OF BANCASSURANCE:

Everybody is a winner in bancassurance. For banks it mainly

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. Hence it is a win-win solution for everyone who

involved.

To the bankers:

In a situation of constant asset base the bank can increases

Return on Assets (ROA)by increasing their income, by

selling insurance products through their own channel. It can

cover operating expenses and make operating expenses

profitable by leveraging their distribution and processing

capabilities

Can leverage on face-to-face contacts and awareness about

the financial conditions of customers to sell insurance

products.

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By acting as a one stop shop for all financial services,

they can improve overall customer satisfaction

resulting in higher customer retention levels

Banks enjoy significant brand awareness within their

geographical region providing for a lower per lead cost when

advertising through print, radio and television. The advantage

of a bank over traditional distributors is the lower cost per

sales lead made possible by their sizeable loyal customer

base.

Can establish sales oriented culture among the

employees

To the customers:

Comprehensive financial advisory services under one roof.

i.e., insurance services along with other financial services

such as banking, mutual funds, personal loans etc.

Enhanced convenience on the part of the insured

Easy access for claims, as banks is a regular go.

Innovative and better product ranges

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To the insurers:

Insurers can exploit the banks' wide network of branches for

distribution of products. The penetration of banks' branches

into the rural areas can be utilized to sell products in those

areas.

Customer database like customers' financial standing,

spending habits, investment and purchase capability can be

used to customize products and sell accordingly.

Since banks have already established relationship with

customers, conversion ratio of leads to sales is likely to be

high. Further service aspect can also be tackled easily.

Factors that appear to be critical for the success of bancassurance

are

Strategies consistent with the bank's vision, knowledge

of target customers' needs, defined sales process for

introducing insurance services, simple yet complete

product offerings, strong service delivery mechanism,

quality administration, synchronized planning across

all business lines and subsidiaries, complete

integration of insurance with other bank products and

services

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Another point is the handling of customers. With customer

awareness levels increasing, they are demanding greater

convenience in financial services.

The emergence of remote distribution channels, such as PC-

banking and Internet-banking, would hamper the distribution

of insurance products through banks.

The emergence of newer distribution channels seeking a

market share in the network.

Bancassurance training for bank employees:

The bank employees will need to be trained in the following aspects of the

insurance business:

Features of the insurance products sold

How to identify and approach a potential customer

Basic insurance needs

Handling basic objections

Other distribution channels and products

Expected roles

Procedures

Remuneration and incentive schemes

Cultures

Customer service

Continuous training and supervision:

Apart from initial training, there should be further training to

support the development of the agent or employee. Some ways in which this can

be done are:

Agency meetings

Bank branch meetings

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Area banking meetings

In-house magazine

Training circulars

Area sales seminars

Company library

Video tapes

Certified courses

Lectures

Training material booklets

Remuneration of bank employees:

Any commission payable by the insurance company is, as a principle, to

be credited to the bank profit center for the bancassurance operation. The bank

management sets the commission level for each manager and employee engaged

in the bancassurance operation.

Selling in the bank branches (by employees or by financial

advisers): For simple packaged products: employees could be

rewarded with gifts and/or salary increments based on their selling

performance in promoting both banking and insurance products.

Such performance could be quantified via the use of a points

system where by the various products are allocated as a number of

points.

Warm leads: In return for providing warm leads, the bank will get

a share, say 50%, of the normal first year commissions.

A basis is needed for allocating this amount between branch staff (who

provide the warm leads) and the bank owners. A possible basis would be:

25% 25% 50%.

The structure shown above generates benefits as follows:

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Financial rewards for employees who generate warm leads

Financial rewards for managers and other staff of the bank branch

who have supported bank activities while the assurance business

was being generated.

Group awards or bonuses are more desirable when the contribution of

the individual employee is either difficult to distinguish or depends on group

cooperation.

1.2 A) NEED FOR THE STUDY

Today’s banking business is not the one we have seen in the past. It has

become much more diversified. With the shift in the customer preferences from

deposits to investments, intense competition etc., the banks saw their profit

margin declining. Thus it has become imperative for the banks to retain the

customer by providing more value added services under one roof as well as to

find alternative ways to generate more income. As bancassurance provides the

best possible solution to all these, most of the banks nowadays have started selling

insurance products to its customers. HDFC bank is also having a tie up with its

subsidiary company HDFC Standard Life Insurance for selling Life insurance

products to its retail customers. Hence there is a need for the study to know

whether HDFC bank has been benefited out of bancassurance by way of financial

analysis and to suggest the areas where they can make use of and converge the

attention of the bank if any, is required.

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INTRODUCTION

1.2 B) STATEMENT OF THE PROBLEM

To understand the financial impact of bancassurance in HDFC bank

and to suggest the ways and means to improve the existing performance by way

of collecting responses from the customers.

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1.2 C) BENEFITS TO THE ORGANIZATION

Through the study the bank can know its financial performance in

bancassurance and whether it is contributing to the overall progress

of the bank or not.

The study would enable HDFC bank to know the general opinion

of customers about insurance and bancassurance so as to know

whether any awareness need to be created about the same.

The study would enable HDFC bank to know how far their

initiatives in promoting HDFC standard life Insurance products

have reached its customers.

It would also enable the bank to know whether they have

established a strong relationship with the customers, as it is

important for bancassurance.

It would also enable the bank to know the number of persons who

are planning to take a life insurance policy in their near future so

that it can take the advantage of the same.

The bank can also know the willingness of the customers in

accepting HDFC bank as their distribution channel in case of

obtaining HDFC standard Life Insurance policy in future.

Finally, it provides the opportunity for the bank to know the areas

where they need to give much emphasis and uplift themselves in

order to occupy a key role in the area of bancassurance.

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1.2 D) SCOPE OF THE STUDY

The study focuses on the financial performance of HDFC bank in

bancassurance and its contribution to the overall progress of the bank with

respect to life insurance alone.

The study analyses the awareness of the customer and the viewpoints of the

customer about insurance as well as bancassurance.

The study also measures the initiatives taken by HDFC bank in endorsing

HDFC Standard Life insurance products.

The study also throws light on the relationship building by HDFC bank with

its customers, as it is the deciding factor for considering the bank as a one-

stop shop for all their financial solutions.

It also indicates the persons who are willing to take life insurance policy in the

immediate future and the reasons for taking the same.

It also pinpoints the willingness of the customer in accepting HDFC Bank, as

their distribution channel, in case of their choice is HDFC standard Life

Insurance for obtaining a policy

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1.3 OBJECTIVES OF THE STUDY

Primary objective: It is to make an analysis on the financial performance of

HDFC bank in bancassurance with specific reference to life insurance and to

suggest the ways and means to improve the existing performance by way of

collecting responses from the customers.

Secondary Objectives:

.

To analyze the financial performance of HDFC bank in bancassurance and

its contribution to the overall progress of the bank using ratio analysis.

To analyze the initiatives taken by the HDFC bank in endorsing the HDFC

Standard Life Insurance products.

To assess the relationship building factors of HDFC bank, which is

significant for bancassurance.

To know the customer preferences in selecting HDFC bank as a

distribution channel in case of their willingness to obtain HDFC Standard

Life Insurance policy in future.

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1 .4 LIMITATIONS OF THE STUDY

Time has played a biggest constraint that the research could not be carried

out comprehensively as the duration of the study was only 4 months.

As the research contains the Secondary data for making a financial

analysis the accuracy and reliability of the analysis depends on reliability

of figures derived from financial statements.

The sample size for collecting the primary data was meager as it includes

only 100 respondents, hence the conclusion would not be a universal one.

Personal biases and prejudices of the customers may also affect the study.

Inspite of the limitations, the study was effective in analyzing the

performance of HDFC bank in bancassurance with specific reference to life

insurance.

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1.5 A) INDUSTRY PROFILE

Banks are among the main participants of the financial system in India.

Banks in India can be categorized into non-scheduled banks and scheduled

banks. Scheduled banks constitute of commercial banks and co-operative banks.

In terms of ownership, commercial banks can be further grouped into nationalized

banks, the State Bank of India and its group banks, regional rural banks and

private sector banks (the old/ new domestic and foreign).

During the first phase of financial reforms, there was a nationalization of

14 major banks in 1969. This crucial step led to a shift from Class banking to

Mass banking. Since then the growth of the banking industry in India has been

a continuous process. It has become an important tool to facilitate the

development of the Indian economy.

During the second phase of reforms, in the early 1990s, the then

Narasimha Rao government embarked on a policy of liberalisation and gave

licences to a small number of private banks, which came to be known as New

Generation tech-savvy banks, which included banks such as UTI Bank(now re-

named as Axis Bank) (the first of such new generation banks to be set up), HDFC

Bank andICICI Bank. This move, along with the rapid growth in the economy of

India, kickstarted the banking sector in India, which has seen rapid growth with

strong contribution from private banks and foreign banks.

Currently, India has 88 scheduled commercial banks (SCBs) - 28 public

sector banks (that is with the Government of India holding a stake), 29 private

banks (these do not have government stake; they may be publicly listed and

traded on stock exchanges) and 31 foreign banks. They have a combined network

of over 53,000 branches and 17,000 ATMs. According to a report by ICRA

Limited, a rating agency, the public sector banks hold over 75 percent of total

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assets of the banking industry, with the private and foreign banks holding 18.2%

and 6.5% respectively. There are 70324 bank offices in India and each bank

office serves around 16000 people. It’s a huge banking infrastructure and

among best banking network in world.

Current scenario:

As far as the present scenario is concerned the banking industry is in a

transition phase. The Public Sector Banks, which are the mainstay of the Indian

Banking system account, are unfortunately burdened with excessive Non

Performing assets massive manpower and lack of modern technology. while on

the other hand the private sector banks are consolidating themselves through

mergers and acquisitions.

On the other hand the Private Sector Banks in India are witnessing

immense progress They have pioneered Internet banking, mobile banking, phone

banking, ATMs. etc., They are forging ahead and rewriting the traditional banking

business model by way of their sheer innovation and service.

The banks today are more market driven and market responsive. The

top concern in the mind of every bank's CEO is increasing or at least

maintaining the market share in every line of business against the backdrop of

heightened competition. With the entry of new players and multiple channels,

customers have become more discerning and less "loyal" to banks. This makes

it imperative that banks provide best possible products and services to ensure

customer satisfaction. To address the challenge of retention of customers, there

have been active efforts in the banking circles to switch over to customer-

centric business model. The success of such a model depends upon the approach

adopted by banks with respect to customer data management and customer

relationship management.

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There has been an increase in the bank focus on retail segment with the

economic slow down. Retail banking has become the new mantra for banking

industry. Banks are now realizing that one of their best assets for building

profitable customer relationships especially in a developing country like India is

the branch. Branches are in fact a key channel for customer retention and profit

growth in rural and semi-urban set up.. Branches could also be used to inform and

educate customers about other, more efficient channels, to advise on and sell new

financial instruments like consumer loans, insurance products, mutual fund

products, etc.

Thus, all the above led to the practice of bancassurance. The Reserve

Bank of India being the regulatory authority of the banking system, with the

reorganization of the need for banks to diversify their activities at the right time,

permitted them to enter into insurance sector as well. It has issued a set of

detailed guidelines setting out various ways for a bank in India to enter into

insurance sector.

IRDA has also felt the necessity of introducing an additional channel of

distribution, which is the Bancassurance to reach out more people. It started

picking up after Insurance Regulatory and Development Authority (IRDA) passed

a notification in October 2002 on 'Corporate Agency' regulations.

Legal Requirements: In India, the banking and insurance sectors are regulated

by two different entities (banking by RBI and insurance by IRDA) and

bancassurance being the combinations of two sectors comes under the purview of

both the regulators. Each of the regulators has given out detailed guidelines for

banks getting into insurance sector. Highlights of the guidelines are reproduced

below:

RBI guideline for banks entering into insurance sector provides three options for

banks. They are:

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Joint ventures will be allowed for financially strong banks wishing to

undertake insurance business with risk participation;

For banks which are not eligible for this joint-venture option, an

investment option of up to 10% of the net worth of the bank or Rs.50

crores, whichever is lower, is available;

Finally, any commercial bank will be allowed to undertake insurance

business as agent of insurance companies. This will be on a fee basis with

no-risk participation.

The Insurance Regulatory and Development Authority (IRDA) guidelines for the

bancassurance are:

Each bank that sells insurance must have a chief insurance executive to

handle all the insurance activities.

All the people involved in selling should under-go mandatory training at

an institute accredited by IRDA and pass the examination conducted by

the authority.

Commercial banks, including cooperative banks and regional rural banks,

may become corporate agents for one insurance company.

Banks cannot become insurance brokers.

Currently there has been an increase in the number of tie-ups with banks and

insurance companies. Some of the models practiced by the banks in India are I)

Referral model ii) Corporate agency model iii) Insurance as a fully integrated

model etc.,

Some of the Bancassurance tie-ups in India are as follows:

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TABLE 1.1: SOME OF THE BANCASSURANCE TIE-UPS IN INDIA

Insurance Company Bank

Birla Sun Life Insurance Co. Ltd.

Bank of Rajasthan, Andhra Bank, Bank of Muscat,

Development Credit Bank, Deutsche Bank and Catholic

Syrian Bank

Dabur CGU Life Insurance

Company Pvt. Ltd

Canara Bank, Lakshmi Vilas Bank, American Express

Bank and ABN AMRO Bank

HDFC Standard Life Insurance Co.

Ltd.

HDFC bank, Union Bank of India, Indian bank,

saraswat bank.

ICICI Prudential Life Insurance Co

Ltd.

Lord Krishna Bank, ICICI Bank, Bank of India,

Citibank, Allahabad Bank, Federal Bank, South Indian

Bank, and Punjab and Maharashtra Co-operative Bank.

Life Insurance Corporation of India

Corporation Bank, Indian Overseas Bank, Centurion

Bank, Satara District Central Co-operative Bank, Janata

Urban Co-operative Bank, Yeotmal Mahila Sahkari

Bank, Vijaya Bank, Oriental Bank of commerce.

Met Life India Insurance Co. Ltd. Karnataka Bank, Dhanalakshmi Bank and J&K Bank

SBI Life Insurance Company Ltd. State Bank of India

Bajaj Allianz General Insurance Co.

Ltd. Karur Vysya Bank and Lord Krishna Bank

Royal Sundaram General Insurance

Company

Standard Chartered Bank, ABN AMRO Bank, Citibank,

Amex and Repco Bank.

United India Insurance Co. Ltd. South Indian Bank

Thus, the present day banks are more diversified than ever before. They

cannot restrict themselves to traditional banking. As bancassurance prospects in

India are brighter that banks in India can make use of the situation to gain

profitable business venture.

30

INTRODUCTION

1.5 (B) COMPANY PROFILE

About HDFC BANK:

HDFC bank was incorporated in August 1994 in the name of 'HDFC

Bank Limited', with its registered office in Mumbai, India. The Housing

Development Finance Corporation Limited (HDFC) was amongst the first to

receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a

bank in the private sector, as part of the RBI's liberalization of the Indian Banking

Industry in 1994.It commenced operations as a Scheduled Commercial Bank on

16th January 1995. The bank has grown consistently and is now amongst the

leading players in the industry.

In a milestone transaction in the Indian banking industry, Times

Bank Limited (another new private sector bank promoted by Bennett, Coleman &

Co./Times Group) was merged with HDFC Bank Ltd., effective February 26,

2000. The acquisition added significant value to HDFC Bank in terms of

increased branch network, expanded geographic reach, enhanced customer base,

skilled manpower and the opportunity to cross-sell and leverage alternative

delivery channels. The Bank at present has an enviable network of over 746

branches spread over 329 cities across India. All branches are linked on an online

real-time basis. Customers in over 120 locations are also serviced through

Telephone Banking. The Bank's expansion plans take into account the need to

have a presence in all major industrial and commercial centers where its corporate

customers are located as well as the need to build a strong retail customer base for

both deposits and loan products. The Bank also has a network of about over1647-

networked ATMs across these cities. Moreover, all domestic and international

Visa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and American Express

Credit/Charge cardholders can access HDFC Bank’s ATM network.

31

INTRODUCTION

Vision: To build a World-Class Indian Bank.

Mission :

Use Enabling Technology to provide value added products and

services to customers. The objective is to build sound customer franchises across

distinct businesses so as to be the preferred provider of banking services for target

retail and wholesale customer segments, and to achieve healthy growth in

profitability, consistent with the bank’s risk appetite. The bank is committed to

maintain the highest level of ethical standards, professional integrity, corporate

governance and regulatory compliance.

Values:

HDFC Bank’s business philosophy is based on four core values –

Operational Excellence

Customer Focus

Product Leadership

People

Capital:

The authorized capital of HDFC Bank is Rs.450 crore (Rs.4.5 billion).

The paid-up capital is Rs.311.9 crore (Rs.3.1 billion). The HDFC Group holds

22.1% of the bank's equity and about 19.4% of the equity is held by the ADS

Depository (in respect of the bank's American Depository Shares (ADS)

Issue). Roughly 31.3% of the equity is held by Foreign Institutional Investors

(FIIs) and the bank has about 190,000 shareholders. The shares are listed on

the Stock Exchange, Mumbai and the National Stock Exchange. The bank's

American Depository Shares are listed on the New York Stock Exchange

(NYSE) under the symbol "HDB".

32

INTRODUCTION

Management:

Mr. Jadish Capoor took over as the bank's Chairman in July 2001. Prior

to this, Mr. Capoor was a Deputy Governor of the Reserve Bank of India. The

Managing Director, Mr. Aditya Puri, has been a professional banker for over

25 years, and before joining HDFC Bank in 1994 was heading Citibank's

operations in Malaysia

The Bank's Board of Directors is composed of eminent individuals with

a wealth of experience in public policy, administration, industry and

commercial banking. Senior executives representing HDFC are also on the

Board. Senior banking professionals with substantial experience in India

and abroad head various businesses and functions and report to the

Managing Director. Given the professional expertise of the management team

and the overall focus on recruiting and retaining the best talent in the industry,

the bank believes that its people are a significant competitive strength.

Awards received: The bank has received many awards to its credit, 'Best

Local Bank in India - 2003' by Finance Asia, 'Best Domestic Bank in India

Region' in The Asset Triple A Country Awards 2003. Apart from this, the bank

has rated 'Best Bank in India in 2003' by Business Today, 'Best Bank in the

Private Sector' for the year 2003 in the Outlook Express Awards, 'Best New

Private Sector Bank 2003' by the Financial Express in the FE-Ernst &

Young Best Bank's survey 2003. It was also figured in the 'Best Under a

Billion, 200 Best Small Companies for 2003' by Forbes Global. For use of

information technology the bank was awarded with 'Best IT user in

Banking' at the IT User Awards 2003 conferred by Economictimes.com

&Nasscom. The bank has also been poured by several awards during the FY

2005-06, which includes one received from ‘Business Today’, which rated the

bank as ‘Best Bank in India’. Asia money awards selected the Bank as 'Best

Domestic Commercial Bank', 'Best Domestic Provider for Local Currency

33

INTRODUCTION

Products' and 'Best Cash Management Bank-India'. Hong Kong-based Finance

Asia Magazine selected the Bank as 'Best Bank in India'. The Asset Magazine

named the Bank 'Best Cash Management Bank' and 'Best Trade Finance

Bank' in India, in 2006. The Economic Times - Avaya Global Connect

Customer Responsiveness Awards 2005 named the Bank 'Most Customer

Responsive Company - Banking and Financial Services'. The Bank has also

been named 'Best Domestic Bank in India' in The Asset Triple A Country

Awards 2005. During 2006-07, the Bank was selected as the 'Best Bank in

India' by the Business Today Magazine for the Fourth consecutive year.

Forbes magazine named the Bank as 'One of Asia Pacific's Best 50

companies'. The Bank was named as the 'Best Listed Bank of India' by the

Business world magazine. The Bank was named as the 'Best Listed Bank of

India' by the Businessworld magazine. The Bank was selected as the Best

Domestic Bank at The Asset Magazine's Triple A Country Awards.

Business Areas:

The bank has three key business areas:

1. Wholesale Banking Services: Here, the bank’s target market is primarily

large, blue chip companies and to a lesser extent, emerging mid-sized corporate.

For these corporates, HDFC bank provide a wide range of services, including

working capital finance, trade services, transactional services, cash

management, etc. They are a leading provider of structured solutions, which

combine cash management services with vendor and distributor finance, for

facilitating superior supply chain management for our corporate customers. They

are also recognized as a leading provider of cash management and

transactional banking solutions to mutual funds, stock exchange members and

banks.

2. Retail Banking Services: The objective of the Retail Bank is to provide the

target market customers a full range of financial products and banking

34

INTRODUCTION

services, giving the customer a one-stop window for all his/her banking

requirements. The products are backed by world-class service and delivered to

the customers through the growing branch network, as well as through

alternative delivery channels like ATMs, Phone Banking, Net Banking and

Mobile Banking. The HDFC Bank Preferred program for high net worth

individuals, the HDFC Bank Plus and the Investment Advisory Services programs

have been designed keeping in mind needs of customers who seek distinct

financial solutions, information and advice on various investment avenues. They

have a wide array of retail loan products including Auto Loans, Loans Against

Securities, Personal Loans and Loans for Two-wheelers. HDFC bank are also a

leading provider of Depository Services to retail customers. Further HDFC

bank are one of the leading players in the “merchant acquiring” business with a

large number of Point-of-sale (POS) terminals for debit / credit cards acceptance

at merchant establishments.

3.Treasury Operations: Within this business, the bank has three main product

areas viz., Foreign Exchange and Derivatives, Local Currency Money Market

& Debt Securities and Equities. With the liberalization of the financial markets

in India, corporates need more sophisticated risk management information,

advice and product structures. These are provided through the bank's

Treasury team. The Treasury business is responsible for managing the returns

and market risk on the bank's investment portfolio.

The above business groups are supported by the following groups:

Audit & Compliance

Credit & Market Risk

Finance, Administration & Legal

Human Resources

Information Technology

35

INTRODUCTION

Operations

36

2.0 REVIEW OF LITERATURE

2.1 Bancassurance - A Global Breakdown:

It is important to outline the impact that bancassurance has had on

differing regions around the world, as well as looking at the major regulations that

impact the further growth of bancassurance. Below, is provided with a brief

synopsis of bancassurance markets in certain key areas.

EUROPE :

Bancassurance is a construct of Europe (France in particular) and this

perhaps helps explain why it is such a phenomenal success within certain

European markets. Largely the 1989 Second Banking Coordination Directive

motivated the large influx of banks into insurance within Europe in recent years.

Currently, the penetration levels are fairly stable in Europe, since bancassurance

in the majority of Western European countries (France, Netherlands, Portugal and

Spain) has reached what studies such as Swiss Re. (2002) argue to be maturity.

These penetration levels will only pick up once bancassurance manages to fully

infiltrate Central and Eastern European countries such as Hungary and Poland,

and the Baltic nations. Currently, the final major hurdle for bancassurance in

Western Europe seems to lie in the U.K. where a predominantly strong insurance

board still attempts to resist the bancassurance trend even in the face of

widespread deregulations.

FRANCE :

In France, the success of bancassurance is mitigated by a favorable tax

treatment on life insurance products, lack of competition within the insurance

industry, and an inadequate pension scheme (Bonnet and Arnal (2000). The

pioneer of bancassurance in France is argued to be Credit Mutual, which created

its own life and non-life subsidiaries in the early 1970’s (Sakr (2001)).

37

REVIEW OF LITERATURE

Bancassurance has seen the most success in the life insurance market, something

that is true for every nation, increasing from 52% in 1995 to account for 69% of

life insurance business n 2000 (Durand (2003), and Turner (1998)). However, as

of late, the banking networks market share of the life insurance market has

remained fairly stagnant, actually dropping over the years to 66% market share in

2001 and 61% in 2003 (Falautona and Marsiglia (2003), Datamonitor (2003)).

This resulted from a combination of falling stock market prices and the banking

network bearing the brunt of lower transfer prices according to Benoist (2002).

This means that banking and insurance companies are overseen separately

within the country. For a conglomerate, the regulator will depend on who is the

parent of the two. for example, if the bank is dominant, then it is the job of the

banking regulator to oversee the company. There are no separates regulators for

financial conglomerates, merely a strong cooperation between different

regulators.

UNITED KINGDOM:

Bancassurers have faced a tougher time in trying to penetrate the U.K.

market, thanks in large to a combination of restrictive regulations and a powerful

insurance governing body. The first move for bancassurers came in 1985 when

Standard Life purchased a stake in the Bank of Scotland. Changes in legislation

soon followed in 1986 and 1988, which made it legal for banks to market

insurance products and set up their own insurance subsidiaries (Sakr (2001)).

Even then, the main type of union between the two was a joint venture, since the

banks placed an emphasis on maintaining the knowledge of the insurer. Twenty

years later, researchers argue that bancassurance is still in its infancy within the

U.K., currently accounting for 15% of new insurance premiums issued (Benoist

(2002),

It is argued that restrictive regulations were detrimental to the growth of

bancassurance within the country and that due to the lack of experience the

38


correct model for the U.K. is still to be found (Hubbard (spring 2001)). Two

benefits of the regulatory system in the U.K. are firstly, that it is based on one

almighty regulator that overseas the different factors of the financial services

industry (the financial Services Authority). This leads to more streamlined

regulations than in other countries that employ functional form regulatory

systems.

SPAIN:

Spain has one of the most developed markets in bancassurance

(Datamonitor (2003)). Current penetration of bancassurers is over 75% of life

insurance business and an ever-increasing proportion of the non-life business. In

Spain, the evolution of the bancassurance market is fostered by the phenomenal

growth within the insurance services industry (life insurance alone has seen 30%

growth per annum over the past 15 years (Durand (2003)). The development of

bancassurance in the Spanish market was facilitated by the well-established

network of regional building societies, and also the cultural mentality that it is

correct to take on risks (Goddard (1999)).

BRAZIL:

In Brazil the laws are in the bancassurers favor, and the banks within the

country control more than 65% of the insurance market (Nigh and Saunders

(2003)), a size that rivals the leading bancassurers in Europe. Furthermore, in

Brazil, bancassurers are assisted by regulations that ban the development of agent

networks (Benoist (2002)).

NORTH AMERICA :

The North American financial services market is the largest in the world

and bancassurance has developed in a differing manner in this region depending

on the country in question. In Canada, there has been consolidated regulation for

more than 15 years and banks are legally allowed to own insurance companies,

but limitations are placed on the products that can be provided (Dorval (2002)).

39


While in Mexico, bancassurance has been a flourishing industry due largely to the

role played by banks in the creation of pension funds since the 1997 pension

reforms.

Bancassurance in the U.S. has, in contrast, faced a very tight regulatory

and legislative environment for many decades. The formation of financial

conglomerates was greatly hindered by the Banking Act of 1933 (Glass-Stegall

Act) and the Bank Holding Company Act of 1956. Only in 1999 did laws become

more favorable to banks offering insurance products, with the passing of the

Gramm-Leach Bliely Act. However, due to the divergence between the state and

federal laws regarding banks offering insurance products, bancassurers still face a

hard time ahead in relation to regulations and attempting to overcome powerful

lobbies that aim to maintain existing hierarchies (Boot (2003)). Currently, only

around 7% of Americans purchase their insurance products through bank

branches (Thomson (summer 2002b)). However, with the ever-continuing

regulatory changes such as the demutualization of insurance companies coupled

with an ageing population, it is widely believed that there will be strong growth

potentials for bancassurers in a mature market such as the U.S.

ASIA AND THE PACIFIC:

Bancassurance in the Asian region has been relatively slow to take off,

with the exception of countries such as Australia, Hong Kong and Singapore

where regulations have been considerable lenient (Swiss Re. (2002)). The trend in

the majority of mainland Asian countries has been for a bank to form ties with a

foreign insurer in order to begin bancassurance operations with around 80% of

these being life insurers, and the financial structure of the operation tends to be in

the form of a distributional agreement. Since bancassurance is still in its infancy

in most Asian countries, it is very susceptible to global changes. The Swiss Re.

(2001) study argues that one of the major threats to the growth of bancassurance

in the region is a U.S. or EURO economic slowdown.

40


Most countries within Asia have only recently begun allowing the

formation of bancassurance operations with the main players listed below. Certain

countries within the region are still holding out against the onslaught of the

bancassurance trend. Vietnam still restricts banks from offering life insurance

products, while South Korea has made certain rules that make it difficult to begin

a bancassurance operation within the country. Nevertheless, bancassurers have

made considerable advancements within the Asian region, having a positive

outlook for future growth. The Swiss Re. (2002) study believes that in few years

from now bancassurers could account for 13% of total premiums collected in

Asia’s life insurance sector.

41


2.2 Quantitative works of major Researchers related to

bancassurance

Compared to the vast amount of descriptive work that has been published

in the field of bancassurance, there is only a limited amount of empirical

studies conducted on the effects that bancassurance actually has on the

company once implemented. This was largely due to the lack of information that

resulted from poor company disclosure statements and inadequate collections of

national statistics. As these problems are being rectified, researchers into the

bancassurance practice are making more and more empirical research;

nevertheless, it is still in its early stages. The following aims at highlighting the

major quantitative findings of certain researchers that have performed

research into the union of banks and insurers.

The majority of past studies have focused mainly on the risk and

profitability effects resulting from the union of a banking and non-banking

firm. One of the earliest studies in this area was performed by Boyd and Graham

(1986). They conducted a risk-of-failure analysis and looked at two periods

around a new Federal Reserve policy (1974s go-slow policy). they found that

bank holding companies (BHCs) involvement in non-banking activities is

significantly positively correlated with the risk of failure over the period 1971-

1977, while the period 1978-1983 showed no significance, thus indicating that

the new policy had a considerable impact on bank holding company (BHC)

expansion into non-banking activities. Boyd and Graham (1988) followed their

1986 study with a paper that used a simulation approach, whereby they simulated

possible mergers between banking and non-banking companies which were then

compared to existing BHCs in order to determine whether the risk of bankruptcy

will increase of decrease should expansion be allowed in to the non-banking

industry, and also to determine the concurrent effect on company profitability.

Their main finding was that the risk of bankruptcy only declined should the BHC

expand into the life insurance practice. Brewers (1989) study finds similar risk

42


reduction benefits existing however cannot specify whether they originate as a

result of diversification, regulation or efficiency gains. Boyd, Graham and

Hewitt (1993) build on Boyd et al. (1988) by conducting a simulation study.

They once again conclude that mergers of BHCs with insurance companies

may reduce risk, whereas those with securities or real-estate firms will not.

Saunders and Walter (1994) and Lown, Osler, Strahan and Sufi (2000) use a

similar method to Boyd and Graham (1988) and obtain similar results with more

current data. Estrella (2001) examines diversification benefits for banks by

using proforma mergers. In contrast to previous studies that incorporate

accounting data, Estrella uses market data and a measure of the likelihood of

failure that is derived through the application of option pricing theory to the

valuation of the firm. the findings indicate that banking and insurance

companies are likely to experience gains on both sides in the majority of the

cases.

The other major series of studies on banks expansion into non-banking

activities focus on the wealth effects of such a move. Cybo-Ottone and Murgia

(2000) analyzed the stock market valuations of mergers and acquisitions in the

European banking industry over the period 1988-1997, and found the existence

of significant positive abnormal returns associated with the announcement of

product diversification of banks into insurance. Furthermore, they found that

country effects do not significantly affect their overall results, suggesting a

homogeneous stock market valuation and institutional framework across Europe.

Carow (2001) looked at the abnormal returns of bank and insurance companies

following the changing legislation brought about as a result of the Citicorp-

Travelers Group merger, and discovered that investors expect large banks and

insurance companies to gain significantly from the legislation removing

barriers to bancassurance. In an event study released later in the same year,

Carow (Mar 2001) found in support the contestable market theory that insurance

companies became worse off and banks had no long-term gains following

legislations further supporting bancassurance within the U.S.Cowan, Howell and

43


Power (2002) conducted a similar event study surrounding four separate court

rulings and discovered that on average only larger, riskier BHCs with fee-based

income gain the most, while smaller, riskier insurers sustain the highest wealth

losses. Fields, Fraser and Kolari (2005) find that bancassurance mergers are

positive wealth creating events by examining abnormal return data. They

further deduced that scale and scope economies were a contributing factor in

these results.

As always, the opponents are there. Amel, Barnes, Panetta and Salleo

(2004) and Strioh (2004) found that consolidation in the financial sector is

beneficial up to a relatively small size in order to reap economies of sale, and that

there is no clear evidence supporting cost reductions stemming from

improvements in managerial efficiencies. Strioh (2004) finds non-banking income

volatile and that there is little evidence of diversification benefits existing. But,

the majority of the past studies have found risk reduction and wealth creating

benefits associated with the expansion of banks into the insurance industry.

44


Article 2.3

Title : INSURERS UPBEAT ON BANCASSURANCE CHANNEL

Bancassurance is likely to generate approximately 35% of private

insurers’ premium income by 2008, according to an analysis of India’s

bancassurance sector by Watson Wyatt Worldwide, a leading global

insurance consulting firm.

‘India Bancassurance Benchmarking Study- 2006/7’ is the first of its kind

survey in the Indian market, and part of an Asia-wide analysis focused on

bancassurance distribution. It sets out to define bancassurance performance

standards and benchmarks against a cross section of industry practices, processes

and productivity indicators. Watson Wyatt has analyzed the bancassurance

channel from the perspective of banks, life insurers and non-life insurers

separately in the report.

Mr. Graham Morris, Director, Watson Wyatt Worldwide said: “the purpose

of the survey was to focus and understand how banks and insurers develop

strategies for selling life and non-life insurance products through the vast

network of bank branches in India and the practical issues they face in

implementing the sales process”. Watson Wyatt had chosen India as the first

country in Asia to do the Benchmarking Survey considering the vibrant growth

of this alternative channel in the country compared to the other Asian markets.

A total of 25 banks covering PSU, Private, and Foreign banks had

participated in the Survey, along with almost all private life and general insurers

licensed in the country.

Nearly 90% of interviewed life insurers are expecting an increase of over

75% in new business premium income for the current financial year from the

40

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bancassurance channel, despite the fact that they consider lack of sales culture on

the part of bank’s branch staff as a key issue in the success of bancassurance.

The lack of a clear bancassurance vision on the part of the bank partner is the

most visible reason for the slow progress in cross selling of insurance, despite the

bank partners having impressive branch networks or large customer bases.

The quality of bank customer data is frequently poor and the absence of

simple CRM tools in most banks makes it difficult to launch specific initiatives

to cross sell insurance products. Public sector banks in the country, which control

more than 90% of the total customers, are seem to be inefficient in recording

basic data about customers and managing available information.

“Growth in bancassurance in India will fall short of its potential unless the

perceived lack of sales culture and vision begin to get addressed by the banks.

An understanding of theses differences will facilitate the mutual goal of

increasing bancassurance as the leading channel in insurance distribution in

India,” said Mr. R.Krishnamurthy, Managing Director, Distribution Practice,

Watson Wyatt Insurance Consulting of the India office.

Banks’ have overwhelmingly expressed a leaning towards insurers with

bancassurance expertise and showing evidence of their commitment. On product

design and development, they seem to demand more attention from insurers to

involve the bank management team.

The brand image of the bank partner, its willingness to bring about a cultural

change and involving the entire branch network are the vital factors that life

insurers consider when entering into a bancassurance tie-up. While developing

their bancassurance strategy, general insurers consider increasing new business

and tapping new markets as the key factors. 100% of respondents ranked gaining

support and commitment from the bank’s management as the critical factor in

building successful bancassurance operations.

41


Both bankers and insurers are bullish about the future outlook of

bancassurance with nearly a quarter of respondents predicting that the overall

share of bancassurance would be about 50% or more in the life segment in the

year 2010.

About 30% of the life insurers have indicated that by the year 2010, rural

insurance business would constitute between 16-20% of their total bancassurance

new business premium.

Life insurers have also expressed overwhelming support to innovative

changes in the bancassurance channel, such as banks having multiple insurer

relationships, exclusive bancassurance products for deepening insurance

penetration and simpler training requirements for the bank staff to qualify as

insurance salespersons.

There is no doubt that bancassurance in India will play a major role as the

insurance sector develops. India has the unique experience of drawing strong

regulatory support for this channel. Coupled with the growing awareness of

banks to leverage on their branch network and customer strengths, the insurance

selling opportunities would get widely tapped at bank branches in the years

ahead.

Source: “Business line” dated Wednesday, 19 December 2007,

42

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3.0 RESEARCH METHODOLOGY

INTRODUCTION:

Research is an academic activity and as such the term should be used

in technical sense. According to Clifford Woody research comprises defining and

redefining problems, formulating hypothesis or suggested solutions, collecting,

organizing and evaluating data; making deduction and reaching conclusion; and at

last care fully testing the conclusions to determine whether they fit the

formulating hypothesis.

The main aim of the research is to find out the truth which is hidden

and which has not been discovered as yet.

OBJECTIVES OF RESEARCH:

1. To gain familiarity with a phenomenon or to achieve new insights into it.

2. To portray accurately the characteristics of a particular individual,

situation or group

3. To determine the frequency with which something occurs or with which it

is associated with something else

4. To test a hypothesis of a casual relationship between variables

RESEARCH DESIGN:

Research design is the arrangement of conditions for collection and

analysis of data in manner that aims to combine relevance to the research purpose

with economy in procedure of data. It is a blue print specifying every stage of

action in the course of research.

The research design adopted in this study for secondary data, is

exploratory and analytical in nature. Exploratory research aims to gain familiarity

and new insights into any phenomenon while analytical research aims at

analyzing the current scenario and thereby using that to project the future

43

RESEARCH METHODLOGY

performance. This research aims at studying the historical performance of the

company in bancassurance and it also evaluates the future prospects of the

company

Descriptive research design is used for collecting primary data.

It is concerned with the research studies with a focus on the portrayal of the

characteristics of a group or individual or a situation. The main objective of such

studies is to acquire knowledge. The major purpose of Descriptive research is

description of the state of affairs, as it exists at present.

SAMPLING:

Sampling may be defined as a selection of some part of an aggregate

or totality on the basis of which a judgment or inference about the aggregate or

totality is made.

SAMPLING DESIGN:

A sampling design is a definite plan for obtaining a sample given

population. There are different methods of sampling. Here Convenience

sampling technique has been used.

CONVENIENCE SAMPLING:

This method of sampling involves selecting the sample elements using

some convenient method without going through the rigor of sampling method.

The researcher may make use of any convenient base to select the required

number of samples.Accordingly, the area selected for the study was kilpauk,

chennai.

44

RESEARCH METHODLOGY

SAMPLE SIZE:

Sample size refers to the number of items to be selected for the universe

to constitute a sample. The total sample size was taken to be 100.

METHODS OF DATA COLLECTION:

NATURE OF DATA: There are two types of data namely primary and secondary

data.

PRIMARY DATA: Primary data is the data collected for the first time through

field survey. This has been used to collect the data for the purpose of this study.

METHOD OF PRIMARY DATA COLLECTION

The method followed in obtaining the primary data was through the

structured questionnaire.

The researcher had used a Questionnaire for obtaining the primary

data for analysis. A questionnaire is a form prepared and distributed to secure

responses to certain questions. Here a well-structured questionnaire has been

prepared with all the important details regarding bancassurance. It has both open

ended and close-ended questions.

PILOT STUDY:

Before a questionnaire is finalized it should be field-tested. As such, pilot

study has been done. That is after the questionnaire was drafted, to decide

whether it is comprehensive or not, it is used with a few (10) respondents Their

responses are studied and it has been helpful in changing the questionnaire like

giving more instructions to the respondents for filling up, re-sequencing the

questions, addition and deletion of questions etc.,

45

RESEARCH METHODLOGY

SECONDARY DATA: It refers to the information or facts already collected.

Such data are collected with the objective of understanding the past status of any

variable. Here, secondary data has been used for making a financial analysis.

METHOD OF SECONDARY DATA COLLECTION:

Annual reports

Journals and Magazines

Internet

Annual reports of HDFC bank have been used for making an analysis

on the financial performance of HDFC bank in bancassurance. And the data

pertinent to bancassurance like articles, previous researches, etc., has been

collected from journals & magazines as well as Internet.

RATING SCALES:

Summated rating scale: In this method, the attitude of people is classified into

specific points with approximately equal attitude value. The respondents to

questions indicate the degree of agreement or disagreement through their

response. Based on the response of all the questions, the attitude of the

respondents is determined. This scale has been used for the following question no:

10,15,17,18,21.

TOOLS USED: As the research contains both primary and secondary data it

includes both financial statement analysis and statistical analysis.

1. FINANCIAL STATEMENT ANALYSIS : Financial statements refer to

the formal and original statements prepared by a business concern to

disclose its financial information. They are useful only when they are

analyzed and interpreted. The basis for financial planning, analysis and

46

RESEARCH METHODLOGY

decision-making is the financial information. Financial information is

needed to predict, compare and evaluate the firm’s earnings ability. In this

research, financial statements like annual reports of HDFC bank from the

year 2003-2006 has been used for making an analysis on the financial

performance of HDFC bank in bancassurance and its contribution to the

overall progress of the bank.

Ratio analysis , one of the most important techniques of financial

statement analysis has been used in this research.

RATIO ANALYSIS: An analysis of financial statements based

on ratios is known as ratio analysis. Ratio analysis is the process

of computing, determining and presenting the relationship of

items. Some of the ratios used in this research are:

Business ratios: They are used for comparing changes in the business from

period to period. With the help of this, one can pinpoint improvements in

performance or developing business areas. Some of the ratios used in this study

are:

Non-interest income as a percentage of total revenue: Non

interest income is the revenue earned by the bank apart from the

interest income. Hence, calculation of this ratio would reveal the

contribution of non-interest income to the total revenue of the

bank. It can be find out by using the formula:

Non-interest income

Total revenue

Non-interest income as a percentage of operating profit: This

would reveal the percentage of non-interest income contribution

to the operating profit.It can be find out by using the formula:

Non-interest income

Operating profit

47

RESEARCH METHODLOGY

Non-interest income as a percentage of working funds: This

would indicate the percentage of non-interest income

contribution to the working funds. It can be calculated by using

the formula:

Non-interest income

Working funds

Return On Assets (Average): This ratio is calculated to

measure the productivity of assets. A comparison of net income

and average total assets, the ROA ratio reveals how much

income management has been able to squeeze from each rupee’s

worth of a company's assets

Return On Assets (Average) = Net Income

Average total assets

Business per employee: This is used to find out the productivity

of the employees. This is calculated based on the average

employee numbers. And business is the total of net advances and

deposits. (Net of inter bank deposits)

Business per employee = Total of net advances and deposits

Average employee numbers

Profit per employee: This is also used to find out the

productivity of the employees in terms of profit. This is also

calculated based on the average employee numbers.

Percentage of net non-performing assets to customer assets:

This is used to find out the percentage of net non-performing

assets to customer assets. This can be obtained by using the

formula:

Net Non Performing Assets

Customer Assets

48

RESEARCH METHODLOGY

Percentage of net non-performing assets to gross advances:

This is used to find out the percentage of net NPA’s to gross

advances. This can be obtained by using the formula:

Net Non Performing Assets

Gross advances

Capital Adequacy Ratio: Capital adequacy ratios are a measure of the amount of

a bank's capital expressed as a percentage of its risk weighted credit exposures. It

is also called as Capital to Risk Weighted Assets Ratio (CRAR) .It determines the

capacity of the bank in terms of meeting the time liabilities and other risk such as

credit risk, operational risk, etc. In the most simple formulation, a bank's capital is

the "cushion" for potential losses, which protect the bank's depositors or other

lenders..

Capital Adequacy Ratio = Total capital funds

Risk weighted assets and contingents

STATISTICAL TOOLS USED:

This constitutes an integral part of research analysis. Hence any analysis of

data compiled should be subjected to relevant analysis so that meaningful

conclusions could be arrived at.

The statistical tools applied in this research are:

Correlation co-efficient

Chi-square test

Percentage analysis.

CORRELATION COEFFICIENT In a bivariate study distribution we may be

interested to find out if there is any correlation or co-variance between the two

variables under study. If the change in one variable affects a change in the other

variable, the variables are said to be correlated. If the two variables deviate in the

same direction i.e. if the increase (or decrease) in one results in a corresponding

increase (or decrease) in the other, correlation is said to be direct or positive. But

49

http://en.wikipedia.org/wiki/Capital

http://en.wikipedia.org/wiki/Credit_(finance)

http://en.wikipedia.org/wiki/Capacity

http://en.wikipedia.org/wiki/Ratio

http://en.wikipedia.org/wiki/Credit_(finance)

http://en.wikipedia.org/wiki/Risk

http://en.wikipedia.org/wiki/Percentage

http://en.wikipedia.org/wiki/Capital

RESEARCH METHODLOGY

if they constantly deviate in opposite directions i.e., if increase (or decrease in one

results in corresponding decrease (or increase) in the other, correlation is said to

be negative.

∑xy/n - (∑x/n) (∑y/n)Correlation coefficient = ……………………………………..

√∑x²/n-(∑x/n)² √∑y²/n-(∑y/n)²

CHI-SQUARE TEST:

When certain observed values of a variable are to be compared with the expected

value the test static,

Ψ² = (O - E) 2

E

Where Oi = observed frequency

Ei = Expected frequency

For more accuracy, Yates correction is used and the formula used is given below:

Ψ² = (O - E) 2

E

Power of association test: When the calculated value in the test is greater than

the tabulated value, we accept the alternative hypothesis Hi. In this case, power of

association test is applied in order to show the strength of association, where N =

sample size. Based on the power of Association Test, the value indicates the fair

relationship between the variable.

PERCENTAGE ANALYSIS: These are the measures of central tendency. It is

used to describe relationships. It can be used to compare the relative terms, the

distribution of 2 or more series of data, since the percentage reduces everything to

a common base and thereby to allow meaningful comparison to be made.

Percentage Analysis = No. Of respondents * 100

Total No. Of respondents

50

DATA ANALYSIS AND INTERPRETATION

4.0 DATAANALYSIS AND INTERPRETATION

4.1 Secondary data analysis: Secondary data analysis, the imperative part of this

study has been undertaken to analyse the performance of HDFC bank in

bancassurance so far and the contribution of bancassurance to the progress of the

bank in the form of increase in ROA, revenue etc., using ratio analysis. Since

HDFC bank has started earning revenue for the sale of insurance policies from

2004 that the analysis includes from the year 2004-2006.

TABLE 4.1.1

HDFC BANK’S EARNINGS FOR THE SALE OF HDFC STANDARD LIFE

INSURANCE POLICIES FROM 2004-2006

Year 2004 –05 2005 -06 2006- 07

Revenue earned

for the sale of

insurance policies

16,99 lacs 88,14 lacs 112,09 lacs

CHART 4.1.1

INFERENCE: From the above, it can be seen that there has been an impressive

growth in the revenue over the years for the sale of HDFC standard life insurance

policies by HDFC bank.

52


TABLE 4.1.2

RETAIL SEGMENT PROFIT FROM THE YEAR 2004 TO 2006: Retail

banking segment is undertaking bancassurance. And it is the fastest growing

banking business segment. One of the reasons being the bank’s dealing with the

sale of insurance policies to its retail customers. It has been mentioned even in the

director report of HDFC bank. Thus a glimpse at its profit would be imperative.

Year 2004-05 2005-06 2006-07

Profit earned by

the retail segment

of HDFC bank

520,64 lacs 701,67 lacs 875,71 lacs

CHART 4.1.2:

INFERENCE: From the above, it can be observed that there has been a

phenomenal increase in the profit of retail segment from 2004-2006, which

symbolizes the bancassurance contribution.

53


TABLE 4.1.3

RETAIL SEGMENT ASSETS FROM THE YEAR 2004 TO 2006: Retail

segment asset can also be increased by way of bancassurance operation. Let us take

a look at its asset position from the year 2004-05 to 2006-07.

Year 2004 –05 2005 -06 2006- 07

Retail assets 24,469,93 38,571,09 50,100,34

CHART 4.1.3

INFERENCE: From the above, we can infer that there has been a phenomenal

increase in the growth of retail assets over the years that it indicates the

contribution of bancassurance to it.

54


TABLE 4.1.4:

OPERATING EXPENSES FROM THE YEAR 2004 TO 2006: Bancassurance

will lead to a reduction in the operating expenses of the bank as it can have the

opportunity of economies of scale. Thus let us took a look at the operating expenses

of HDFC bank from the year 2004-05 to 2006-07.

Year 2004 –05 2005 -06 2006- 07

Operating

expenses

1,085,40 1,691,09 2,420,80

CHART 4.1.4:

INFERENCE: From the chart, we can observe that there has been an increase in

the operating expenses of the bank. Since, HDFC bank is only in its infant stage in

bancassurance, it can perform more to reduce the same in the long run.

55


TABLE 4.1.5:

NON-INTEREST INCOME AS A PERCENTAGE OF TOTAL REVENUE:

As bancassurance revenue leads to an increase in the non-interest income, the non-

interest income as a % of total revenue from the year 2004-2006 is as follows:

Year 2004-05 2005-06 2006-07

Non interest

income

651,34 1,123,98 1,516,23

Total revenue 3,744,83 5,599,32 8,405,25

Ratio 17.39 20.07 18.03

Chart 4.1.5:

INFERENCE: From the above, it can be observed that non-interest income as a

% of total revenue though increased in the year 2005,it has been decreased in the

year 2006.

56


TABLE 4.1.6 :

NON-INTEREST INCOME AS A % OF OPERATING PROFIT: Non-

interest income as a contribution to the % of operating profit from the year 2004-

2006 is shown as below:

Year 2004-05 2005-06 2006-07

Non-interest income

651,34 1,123,98 1,516,23

Operating profit

1,156,02 1,733,84 2,562,86

Ratio 56.34% 64.82% 59.16%

Chart 4.1.6:

INFERENCE: From the above, it can be observed that non-interest income as a

% percentage of operating profit has been increasing from 2004 to 2005.But it has

been decreased in the year 2006-07.

57


Note: Operating profit = (interest income + other income – interest expense –

operating expense –amortization of premia on investments - profit/(loss) on sale

of fixed assets).

Business ratios (As per the director’s report of HDFC bank) TABLE 4.1.7 :

NON – INTEREST INCOME AS A % OF WORKING FUNDS: Non-interest

income as a % of working funds is shown as below:

Year 2004-05 2005-06 2006-07

Non interest income

as a % of working

funds

1.44% 1.79% 1.76%

Chart 4.1.7:

INFERENCE: From the chart it can be observed that non-interest income as a%

percentage of working funds though increased in the year 2005,it has been

decreased in the year 2006.

58


TABLE 4.1.8 :

RETURN ON ASSETS (AVERAGE): The best opportunity for the banks, which

undertakes bancassurance operation is that, it can increase its return on assets.

Hence, the return on assets of the bank from 2004-2006 is as follows:

Year 2004-05 2005-06 2006-07

Return on

Assets

(Average)

1.47% 1.38% 1.33%

Chart 4.1.8 :

INFERENCE: From the above, it can be observed that the return on assets of the

bank has been decreased from the year 2004 – 2006.

59


TABLE 4.1.9 ;

BUSINESS PER EMPLOYEE: The business per employee from 2003-2006 is as

follows:

Year 2004-05 2005-06 2006-07

Business Per

Employee

806 758 607

Chart 4.1.9:

INFERENCE: From the above, it is clear that the business per employee of the

bank over the years has been on the decreasing trend.

60


TABLE 4.1.10

PROFIT PER EMPLOYEE: Profit per employee from 2004-2006 is as follows:

Year 2004-05 2005-06 2006-07

Profit per

employee

8.80 7.39 6.13

Chart 4.1.10 :

INFERENCE : From the above, it can be observed that profit per employee of the

bank over the years has been on the decreasing trend.

RBI guidelines: As per the RBI guidelines for the banks to enter into the

insurance sector, The CRAR of the bank should not be less than 10 per cent,

and the level of Non Performing Assets (NPAs) should be reasonable. Hence,

analysis of such ratios is also important.

61


Capital adequacy ratio: Capital adequacy ratio from the year 2004-2006 can

be shown as follows: (As the total capital includes tier-1 and tier-2, it can be

viewed separately.)

TABLE 4.1.11 Tier 1 capital:

Year 2004-05 2005-06 2006-07

Tier 1 capital 3,96,216 5,149,91 6,352,71

Risk weighted assets

and contingents 41,27,103 60,217,62 74,081,92

Ratio 9.60% 8.55% 8.57%

TABLE 4.1.12 Tier 2 capital:

Year 2004-05 2005-06 2006-07

Tier 2 capital 1,054,73 1,720,71 3,339,99

Risk weighted assets

and contingents 41,27,103 60,217,62 74,081,92

Ratio 2.56% 2.86% 4.51%

Where,

Tier –1 capital includes paid up capital, statutory reserve, general reserve,

balance in profit and loss account and amalgamation reserve. From this,

outstanding deferred tax asset, if any, is deducted.

Tier– 2 capital includes general loan loss reserves, investment fluctuation

reserve and subordinated debt.

62


TABLE 4.1.13 Total Capital:

Year 2004-05 2005-06 2006-07

Total capital 5,016,89 6,870,62 9,692,70

Risk weighted

assets and

contingents

41,27,103 60,217,62 74,081,92

Ratio 12.16% 11.41% 13.08%

Chart 4.1.11 :

INFERENCE: From the above, it can be seen that the capital adequacy ratio

though decreased in the year 2005,it has been increased in the year 2006-07.

63


TABLE 4.1.14:

PERCENTAGE OF NET NON PERFORMING ASSETS TO CUSTOMER

ASSETS: The percentage of net non-performing assets to customer assets is

shown as below from the year 2004-2006:

Year 2004-05 2005-06 2006-07

Percentage of net

non performing

assets to customer

assets

0.20% 0.36% 0.38%

Chart 4.1.12 :

INFERENCE: From the above, it is clear that the percentage of net non-

performing assets to customer assets has been increasing from the year 2004-2006

64


TABLE 4.1.15

PERCENTAGE OF NET NON-PERFORMING ASSETS TO NET

ADVANCES: The percentage of net non-performing assets to net advances from

the year 2004-2006 are shown as follows:

Year 2004-05 2005-06 2006-07

Percentage of net

non performing

assets to net

advances

0.24% 0.44% 0.43%

Chart 4.1.13 :

INFERENCE: From the above, it can be observed that the percentage of net

non-performing assets to net advances has been increased from the year 2004 to

2005 and it has been decreased in the year 2006.

65


TABLE 4.1.16

PERCENTAGE OF GROSS NON-PERFORMING ASSETS TO GROSS

ADVANCES: The percentage of gross non-performing assets to gross advances

from the year 2004- 2006 are shown as follows:

Year 2004-05 2005-06 2006-07

Percentage of

gross non

performing assets

to gross advances

1.69% 1.32% 1.32%

Chart 4.1.14:

INFERENCE: From the above, it can be observed that the percentage of gross

non-performing assets to gross advances has been decreasing from the year 2004

–2006.

66


4.2 PRIMARY DATA ANALYSIS:

Based on the objective, a well-structured questionnaire was framed and

the following clearly represents all the related data and their interpretations in a

detailed form with statistically proven inferences.

TABLE 4.2.1

AGE FACTOR :

INFERENCE:

From the above table it can be inferred that 12% of the respondents belongs to 20-

25 Age limit, 20% of the respondents belongs to 25-30 Age limit, 24% of the

respondents belongs to 30-35 Age limit, 26% of the respondents belong to 35-40

Age limit and the remaining 18% of the respondents belongs to above age 40.

Hence the majority of the respondents fall in to the category of 35-40 Age limit.

TABLE 4.2.2

GENDER :

INFERENCE: From the above table it can be observed that 76% of the

respondents are Male and 24% of the respondents are female. Hence the majority

of the respondents are Male.

AGE LIMIT NO. OF RESPONDENTS

PERCENTAGE

20-25 12 1225-30 20 2030-35 24 2435-40 26 26

Above 40 18 18TOTAL 100 100

GENDER NO. OF RESPONDENTS

PERCENTAGE

Male 76 76Female 24 24

TOTAL 100 100

68


TABLE 4.2.3

OCCUPATION :

OCCUPATION NO. OF RESPONDENTS

PERCENTAGE

Salaried 49 49Businessman 34 34

Retired 15 15Others 2 2

TOTAL 100 100

INFERENCE:

From the above table it is observed that 49% of the respondents are

salaried, 34% of the respondents are involved in business, and 14% of the

respondents retired and a less percentage of 2 have fallen into the category of

others includes professionals. Thus, majority of the respondents are Salaried.

TABLE 4.2.4

MARITAL STATUS :

MARITAL

STATUS

NO. OF RESPONDENTS

PERCENTAGE

Single 28 28Married 72 72TOTAL 100 100

INFERENCE:

From the above table, it can be seen that 28% of the respondents are single

and 72% of the respondents are married. Hence the majority of the respondents

are married.

69


TABLE 4.2.5

NO. OF CHILDREN : NO. OF CHILDREN NO. OF RESPONDENTS PERCENTAGE

Yes 68 68No 4 4N/A 28 28

TOTAL 100 100

INFERENCE: From the above table it can be seen that 68% of the respondents

who have got married are having children and 4% of the respondents are not

having so far .

TABLE 4.2.6

ANNUAL INCOME :

ANNUAL INCOME NO. OF RESPONDENTS PERCENTAGE

<2 LAKHS 22 222-4 LAKHS 43 434-6 LAKHS 27 27

Above 6 LAKHS 8 8TOTAL 100 100


are earning less than 2 lakhs p.a., 43% of the respondents are earning 2-4 lakhs

p.a., which is the major percentage, 27% of the respondents are earning 4-6 lakhs

and the remaining respondents are earning above 6 lakhs p.a.,

TABLE 4.2.7

70


ACCOUNT HOLDER OF HDFC BANK :

ACCOUNT HOLDER

OF HDFC BANK

NO. OF RESPONDENTS PERCENTAGE

Yes 86 86No 14 14

TOTAL 100 100

INFERENCE : From the above table it is found that 86% of the respondents,

which is a majority, are holding Account in HDFC Bank and 14% of the

respondents are Non-Account Holders of HDFC bank. Non-a/c holders include

borrowers, credit card holders and the persons dealing with investments.

TABLE 4.2.8

TYPE OF ACCOUNT :

TYPE OF ACCOUNT NO. OF RESPONDENTS PERCENTAGE

Savings A/C 57 57Current A/C 11 11

Both 18 18N/A 14 14

TOTAL 100 100


are Saving A/C holders and 11 % of the respondents are Current A/C holders.

And 18% people own both the type of accounts. And for 14% of the people this

question is not applicable as they are not the account holders of HDFC bank.

TABLE 4.2.9:

71


NO. OF YEARS ASSOCIATIED WITH HDFC BANK :

NO. OF YEARS NO. OF RESPONDENTS PERCENTAGE

<1 Yr. 24 241-3 Yrs 39 393-5 Yrs 33 335-7 Yrs 4 4> 7 Yrs 0 0TOTAL 100 100

INFERENCE: From the above, it is found that 24% of the respondents are

having less than 1 year associability with HDFC Bank where as a major 39% of

the customers have 1-3 years of relationship. 33% of the respondents are having

3-5 years relationship 4% of the respondents are having greater than 5 but less

than 7 years of relationship. No customer among the respondents is having greater

than 7 years relationship with HDFC Bank.

72


TABLE 4.2.10

PERSONAL VIEWS ABOUT INSURANCE :

PERSONAL VIEWS ABOUT

INSURANCE

StronglyAgree

Agree Neutral Disagree StronglyDisagree

Total

A) Insurance provides protection to you and your family

32 37 19 12 0 100

B) Insurance is an absolute necessity for an individual/family

10 30 38 19 3 100

C) Insurance is one of the best Investment options

9 20 42 21 8 100

73


CHART 4.2.1

INFERENCE: From the above, it can be observed that

(A) 32% of the respondents Strongly agree that Insurance provides protection

to their family and 37%, which is a majority, agree to the same. But 19%

of the respondents remained Neutral and 12% disagree the same. No one

Strongly disagreed the view.

(B) 10% of the respondents Strongly agree that Insurance is an absolute

necessity for an Individual/family and 30% agree to this. 38% stayed

Neutral and 19% of the respondents disagreed the view. A less percentage

of 3 strongly disagreed the view.

(C) 9% of the respondents Strongly agree that Insurance is one of the best

investment options and 20% agree to this. 42%, that is a majority,

remained neutral whereas 21% disagreed the point. Also 8% of the

respondents Strongly disagreed.

74


TABLE 4.2.11

LIFE INSURANCE POLICY HOLDER

LIFE INSURANCEPOLICY HOLDER


Yes 47 47No 53 53

TOTAL 100 100

CHART 4.2.2:

INFERENCE: From the above, it can be noticed that 47% of the respondents are

holding a Life Insurance policy currently and the big rest 53% are not holding any

Life Insurance policy.

TABLE 4.2.12

75


AWARENESS ABOUT HDFC STANDARD LIFE INSURANCE

AWARE OF HDFC STANDARD LIFE

INSURANCE


Yes 72 72

No 28 28

TOTAL 100 100

CHART 4.2.3

INFERENCE:

From the above table, it can be observed that a vital part of the

respondents, which is 72% are aware about HDFC Life insurance and 28% do not

have the same.

TABLE 4.2.13

SOURCE TO KNOW ABOUT HDFC LIFE INSURANCE

76


SOURCE No. of respondents Percentage

HDFC Bank 28 39

Advertisement 44 61

Friends & Relatives 0 Nil

Others 0 Nil

N/A 28 28

Total 100 100

CHART 4.2.4:

INFERENCE:

From the above we can understand that the major Source to Know

about HDFC Life Insurance is Advertisement, which is conveyed by 61% of the

respondents. Whereas HDFC Bank owns 39%.

TABLE 4.2.14

AWARE OF BANKS CROSS-SELL INSURANCE PRODUCTS (in %)

AWARE OF BANKS NO. OF RESPONDENTS PERCENTAGE

77


CROSS-SELLINSURANCE PRODUCTS

Yes 48 48

No 52 52

TOTAL 100 100

CHART 4.2.5

INFERENCE:

From the above, it can be noticed that 48% of the respondents are

aware of Banks cross-selling Insurance products but 52% of the respondents

which is a majority are not aware of the same.

TABLE 4.2.15

78


ADVANTAGES IN BUYING THE INSURANCE POLICIES THROUGH BANKS

ADVANTAGES StronglyAgree

Agree Neutral Disagree Strongly Disagree

Total

A) Expert advice

17 28 26 22 7 100

B) Convenience 20 44 24 12 0 100

C) Easy accessibility

12 41 35 8 4 100

CHART 4.2.6:

79


INFERENCE: From the above, it can be observed that,

A) 17% of the respondents strongly agree with the advantage of

expert advice in buying through banks and the same is agreed

by 28 %. 26% of the respondents remained neutral and 22%,

7% of the respondents strongly disagree and disagree

respectively.

B) 20% of the respondents felt convenience in buying insurance

policies through banks and they strongly agree to that. Also

44% agree the same. But 24% stayed neutral whereas 12%

disagreed this point. No one strongly disagreed the same.

C) 12% of the respondents strongly agree and 41% agree with the

advantage of easy accessibility.35% remains neutral. Only 8%

disagree and 4% strongly disagree to this view.

Thus, majority of the respondents agree with the advantages in

buying the insurance policies through banks.

80


TABLE 4.2.16

AWARE OF OBTAINING HDFC STANDARD LIFE POLICY FROM

HDFC BANK

AWARE OF OBTAINING POLICY

FROM HDFC BANK


Yes 46 46

No 54 54

TOTAL 100 100

CHART 4.2.7

INFERENCE:

From the above, it can be noticed that 46% of the respondents

know well that HDFC standard life insurance policy can be bought from HDFC

bank branches. But 54% of the respondents, which is a majority, don’t know the

same.

T ABLE 4.2.17

81


FAMILIARITY WITH THE POLICIES OFFERED BY HDFC STANDARD

LIFE INSURANCE

FAMILIAR WIH THE TYPES OF POLICIES OFFERED BY

HDFC STANDARD LIFE INSURANCE

No. of respondents Percentage

Strongly Agree 11 11

Agree 26 26

Neutral 14 14

Disagree 37 37

Strongly Disagree 12 12

Total 100 100

CHART 4.2.8

INFERENCE: From the above, it can be seen that 11% of the respondents are

familiar with the different types of policies offered by HDFC Standard Life

insurance which they have strongly agree and 26% agree to it. Whereas 14%

remained neutral. 37% disagreed and 12% of the respondents strongly disagreed

the view. Thus, majority of the respondents are not familiar with the different

types of policies offered by HDFC Standard Life Insurance.

TABLE 4.2.18

82


INITIATIVES TAKEN BY HDFC BANK TO PROMOTE HDFCSTANDARD LIFE INSURANCE PRODUCTS

INITIATIVES TAKEN BY HDFC BANK

Strongly Agree


Total

You have often noticed the displays regardingHDFC Standard Life Insurance in HDFC Bank

12 22 18 33 15 100

You have come across advertisements/links etc., regarding HDFC Standard Life Insurance in HDFC Bank Web Site

10 22 13 34 21 100

HDFC Bank Employees have explained you about the policies of HDFC standard life insurance (through phone calls/direct contact)

14 27 12 35 12 100

CHART 4.2.9:

83



(a) 12% of the respondents strongly agree that they have noticed the

displays of HDFC standard life Insurance in HDFC Bank. Also

22% support them by agreeing to it. 18% remain unbiased and

33% disagree the statement. And 15% of the respondents have

strongly disagreed the same.

(b) 10% of the respondents strongly agree that they have come across

the links/ads concerning HDFC standard life insurance in the web

site of HDFC Bank. 22% agree to this point and 13% replied

neutral. But 34% disagree to this and 21% strongly disagree the

same.

(c) 14% of the respondents strongly agree that the Employees of

HDFC bank has explained them about HDFC Standard life

insurance products. And the same has been agreed by 27% of the

respondents. 12% of the respondents didn’t take either side.

Whereas 35% disagree the statement and 12% of the respondent’s

have strongly disagreed.

TABLE 4.2.19

SATISFACTION OF CUSTOMER SERVICES

84


CUSTOMER SERIVICE No. of respondents Percentage

Highly Satisfied 13 13

Satisfied 43 43

Moderately satisfied 28 28

Dissatisfied 13 13

Highly dissatisfied 3 3

Total 100 100

CHART 4.2.10:

INFERENCE: From the above, it can be observed that 13% of the respondents

replied that they are highly satisfied with the customer service provided by HDFC

bank. And good percentage of 43 answered that they are satisfied with the

customer service. Also, 28% of the respondents say that they are moderately

satisfied but 18% declared that they are dissatisfied with the customer service. A

less number of 3% also claim that they are highly dissatisfied with the same.

Overall, most of the respondents are satisfied with the customer services.

TABLE 4.2.20

85


FACTORS THAT BUILD A STRONG RELATIONSHIP WITH CUSTOMERS

RELATIONSHIP BUILDINGFACTORS

Strongly Agree


Total

Reliability 37 42 12 7 2 100

Easy and advantageousbanking over other

banks

15 21 24 36 4 100

Wide range ofProducts and Schemes

13 24 32 28 3 100

Better understandingof customer needsand provide expert

advice

15 23 33 26 3 100

CHART 4.2.11:

86



(a) 37% of the respondents strongly agree with the Reliability factor. Also

42% of the respondents agree to it. 12% stayed neutral.7% of the

respondents have disagreed and 2% strongly disagreed to it.

(b) 15% of the respondents strongly agree to the fact that there exists an

easy and advantageous banking over other banks. Also 21% of the

respondents agreed the same. 24% stayed neutral. A typical 36% of the

respondents disagree the view and 4% strongly disagree the same.

(c) 13% of the respondents strongly agree to the factor of wide range of

products and schemes. The same is also agreed by 24%. 32% of the

respondents remained neutral.28% of the respondents disagreed this

view and a less percentage of 3 also strongly disagree to this.

(d) 15% of the respondents strongly agree to the factor of better

understanding of customer needs and Expert advice and 22% agree to

the view.33% stayed neutral. Whereas 26% of the respondents have

disagreed and 34% have strongly disagreed.

TABLE 4.2.21

87


HDFC BANK AS A ONE-SHOP STOP FOR ALL FINANCIAL NEEDS

HDFC Bank as a one stopShop


Strongly Agree 12 12

Agree 22 22

Neutral 36 36

Disagree 22 22

Strongly Disagree 8 8

Total 100 100

CHART 4.2.12

INFERENCE: From the above, it can be seen that 12% of the respondents

strongly agree that they will prefer HDFC Bank as a one-stop shop for all their

financial needs. 22% of the respondents replied that they agreed and 36% of the

respondents, which is a majority, remain neutral about this. But 22%have denied

the same. And 8% have strongly disagreed to it.

TABLE: 4.2.22

88


PLAN TO TAKE ANY LIFE INSURANCE POLICY IN THE NEAR FUTURE

PLANNING TO TAKE ANY LIFE INSURANCE

POLICY


Yes 42 42No 58 58

TOTAL 100 100

CHART 4.2.13

INFERENCE :

From the above table it can be observed that 42% of the respondents

have a plan to take a life insurance policy in the near future but 58% of the

respondents, which is a majority, have no such idea.

TABLE: 4.2.23

REASONS FOR TAKING A LIFE INSURANCE POLICY IN THE NEAR FUTURE

89


REASONS FOR TAKING A LIFE

INSURANCE POLICY

Highly Essential

Essential LeastEssential

Not Essential

Not Essential

At All

N/A Total

Post retirement income

4 4 10 13 11 58 100

Invest in child’s dreams

5 8 12 8 9 58 100

Give Protection and safety to the family in case of

unfortunate occurrences

3 3 11 12 13 58 100

Tax Benefits 19 11 3 6 3 58 100

Better returns in terms of

investment

11 16 6 3 6 58 100

CHART 4.2.14

90


INFERENCE : From the above, it can be observed that, out of 42 respondents, 19

respondents i.e., 45% ranked Tax Benefits as a Highly Essential one for taking a

policy in the near future. And 16 respondents i.e., 38% ranked Better returns as an

essential one. 12 respondents i.e., 28% ranked Invest in Child dreams as Least

Essential.13 respondents i.e., 31% ranked Post retirement income as Not

Essential. The reason for taking the policy to protect the family in case of

unexpected occurrences has been ranked as Not Essential at all by 13

respondents,i.e., 31%.

TABLE: 4.2.24

CHOOSING HDFC STANDARD LIFE INSURANCE TO TAKE A

91


POLICY IN FUTURE

CHOOSING HDFC STANDARD LIFE

INSURANCE


Yes 47 47

No 53 53

Total 100 100

CHART 4.2.15

INFERENCE :

From the above table it can be seen that 47% of the respondents replied

that their choice will be HDFC Standard Life Insurance and 53% denied the same.

Note that 58 respondents who are not having the idea of taking any life insurance

policy in the near future have been told to assume if they take a life insurance

policy in distant future to respond to this question.

TABLE: 4.2.25

CHANNEL TO OBTAIN HDFC STANDARD LIFE INSURANCE POLICY

CHANNEL TO OBTAIN HDFC STANDARD LIFE

INSURANCE


92


HDFC Bank 40 40

Financial Consultants /Agents 7 7

Others 0 0

N/A 53 53

Total 100 100

CHART 4.2.16

INFERENCE :

From the above, it can be inferred that a majority of the

respondents i.e., 40 are willing to obtain HDFC Standard Life Insurance policy

from HDFC bank itself. And 7 respondents want to buy from financial

consultants/Agents. And for the remaining 53% of the respondents this question is

not applicable.

STATISTICAL ANALYSIS

In this section the researcher has used statistical tools in order to

analytically prove the study that has been undertaken. The tests had been used on

selected question as they prove in-depth significance of the research brought out.

93


Co-efficient of correlation: Correlation is used to find out if there is any

correlation or co-variance between the two variables under the study.

It has been used here to analyze the relationship between familiarity

among the customers about different types of HDFC standard life insurance

policies and the various initiatives taken by HDFC bank to promote HDFC standard

life products.

Q.17 Familiarity of the different types of HDFC standard life policies (X)

Q.18 a) Frequent Notice of displays regarding HDFC standard life products

inside HDFC bank(Y)

Q.17 Strongly Agree =11, Agree = 26,Neutral =14,Disagree =37,Strongly

Disagree=12.

Q.18 a) Strongly Agree =12, Agree = 22,Neutral =18,Disagree =33,Strongly

Disagree=15.

X = 313 x2 = 1133 y = 317 y2 = 1165 xy = 1142 n(Sample Size) =100

Where Correlation Co-efficient (r) = ∑xy/n - (∑x/n) (∑y/n) ___________ ____________ √∑x²/n- (∑x/n)√∑y²/n-(∑y/n)²

r = 11.42 – (3.13) (3.17) 11.33-9.7969 11.65– 10.0489 = 11.42 – 9.9221

1.2381*1.2653

94


= 1.4979

1.5554 = 0.963

INFERENCE: Hence it can be inferred from the above that there is a very strong

relationship (96.3%) between the familiarity of different types of HDFC Standard

Life policies and the frequent notice of displays regarding the HDFC Standard

Life policies inside HDFC bank.


Q.18 b) Come across HDFC standard life insurance most of the times in

HDFC bank website.(Y)

Q.17 Strongly Agree =11, Agree = 26, Neutral =14, Disagree =37, Strongly

Disagree=12.

Q.18 b) Strongly Agree =10, Agree = 22,Neutral =13, Disagree =34,Strongly Disagree=21

X = 313 x2= 1133 y = 334 y2= 1284 xy = 1178 n =100

Where Correlation Co-efficient (r) = ∑xy/n - (∑x/n) (∑y/n) ___________ ____________ √∑x²/n- (∑x/n)² √∑y²/n-(∑y/n)²

r = 11.78 – (3.13) (3.34) 11.33-9.7969 12.34 – 11.1556

= 11.78 - 10.4542 1.2381*1.2978

r : 96.3%

95


= 1.3258

1.6068 = 0.825

INFERENCE: Thus it can be observed that there is a strong (82.5%) of

correlation between the familiarity of different types of HDFC standard life

policies among customers and come across HDFC standard life products in

HDFC bank website.


Q.18 c)Explanation of HDFC standard life policies by HDFC bank employees

through phone calls/direct contact (Y)

Q.17 Strongly Agree =11, Agree = 26,Neutral =14,Disagree =37,Strongly

Disagree=12.

Q.18 c)Strongly Agree =14, Agree = 27,Neutral =12,Disagree =35,Strongly

Disagree=12

X = 313 x2= 1133 y = 304 y2= 1090 xy = 1090 n =100

Where Correlation Co-efficient (r) = ∑xy/n - (∑x/n) (∑y/n) ___________ ____________ √∑x²/n- (∑x/n)² √∑y²/n-(∑y/n)²

r : 82.5%

96


r = 10.9 – (3.13) (3.04) 11.33-9.7969 10.9- 9.2416

= 10.9 – 9.5152 1.238 * 1.2877 = 1.3848 1.5942

= 0.868

INFERENCE: Thus there is a strong

(87 %) correlation between the familiarity among the customers about different

types of HDFC standard life policies and the explanation of HDFC bank

employees about HDFC standard life insurance through phone calls or direct

contact.

2.Co-efficient of correlation: It has been used here to analyze the relationship

between considering HDFC Bank as a one-stop shop for all the financial needs of

a customer and the factors that builds a strong relationship with customers.

Q.21 Prefer HDFC bank as a one shop for all the financial needs (X)

Q.20 a) Reliability factor in HDFC bank (Y)

r : 86.8%

97


Q.21 Strongly Agree =12, Agree = 22, Neutral =36, Disagree =22, Strongly Disagree=8

Q.20 a) Strongly Agree =37, Agree = 42,Neutral =12,Disagree =7,Strongly Disagree=2

X = 308 x2= 1072 y = 405 y2= 1735 xy = 1323 n =100

Where Correlation Co-efficient (r) = ∑xy/n - (∑x/n) (∑y/n) ___________ ____________ √∑x²/n- (∑x/n)² √∑y²/n-(∑y/n)² r = 13.23 – (3.08) (4.05) 10.72-9.4864 17.35 -16.40

= 13.23 – 12.474 1.11067 * 0.9745 = 0.756 1.082

= 0.699%

INFERENCE: Thus there is a 70% of correlation between the existence of the

factor reliability in HDFC bank and acceptance of HDFC bank as a one-stop for

all the financial needs.

Q.21.Prefer HDFC bank as a one shop for all the financial needs (X)

r : 69.9%

98


Q.20 b) Easy and advantageous banking over other banks in HDFC bank (Y)

Q.21 Strongly Agree =12, Agree = 22,Neutral =36,Disagree =22,Strongly Disagree=8

Q.20 b) Strongly Agree =15, Agree = 21,Neutral =24,Disagree =36,Strongly

Disagree=4

X = 308 x2= 1072 y = 307 y2= 1075 xy = 1060 n =100

Where Correlation Co-efficient (r) = ∑xy/n - (∑x/n) (∑y/n) ___________ ____________ √∑x²/n- (∑x/n)² √∑y²/n-(∑y/n)² r = 10.60 – (3.08) (3.07) 10.72-9.486 10.75- 9.424

= 10.60 – 9.4556 1.11067 * 1.15113 = 1.1444 1.278532

= 0.895%

INFERENCE: Thus there is a strong

(90%) correlation between existence of the factor easy and advantageous banking

over other banks and acceptance of HDFC bank as a one-stop for all the financial

needs.


Q.20 c) Wide range of products and schemes (Y)

r : 89.5%

99



Q.20 c) Strongly Agree =13, Agree = 24,Neutral =32,Disagree =28,Strongly

Disagree=3

X = 308 x2= 1072 y = 316 y2= 1112 xy = 1055 n =100


= 10.60 – 9.7328 1.11067 * 1.0650 = 0.8172 1.182961

= 0.691%

INFERENCE: Thus there is a 69% of correlation between existence of the factor

wide range of products & schemes and acceptance of HDFC bank as a one-stop

for all the financial needs.


Q.20 d) Better understanding of customer needs and provide expert advice.(Y)

r : 69.1%

100



Q.20 d) Strongly Agree =15, Agree = 23,Neutral =33,Disagree =26,Strongly

Disagree=3

X = 308 x2= 1072 y = 321 y2= 1147 xy = 1093 n =100


= 10.93 – 9.8868 1.11067 * 1.0797 = 1.0432 1.199272

= 0.869%

INFERENCE: Thus there is an 87% of correlation, which is very strong,

between acceptance of HDFC bank as a one-stop for all the financial needs and

existence of the factor better understanding of customer needs and provide expert

advice in HDFC bank

r : 86.9%

101


3.Chi-square test: When certain observed values of a variable are to be

compared with the expected value, the test static

Ψ² = (O - E) 2

E

Where Oi = observed frequency

Ei = Expected frequency

For more accuracy, Yates correction is used and the formula used is given below:

Ψ² = (O - E) 2

E

102


Here, Chi-square test has been applied as a goodness of fit, in order

to know the association between the persons who are planning to take insurance

policy in the future and the persons who prefer HDFC standard life for obtaining a

policy in the future.

Null hypothesis:

There is no association between the persons who are planning to take

an insurance policy in future and the persons who prefer HDFC standard life

insurance to buy an insurance policy in the future.

Alternative hypothesis:

There is an association between the persons who are planning to take

an insurance policy in future and the persons who prefer HDFC standard life

insurance to buy an insurance policy in the future.

Calculation:

Planning to take any life insurance policy in future.

Will HDFC Standard

Life insurance be

your choice for

obtaining the policy

in future.

Yes No Row Total

Yes 30 17 47

No 12 41 53

Column

Total

42

42%

58

58%

100

100%103


Expected frequencies are given in the table:

42 *47 /100 = 19.74 58* 47/100 = 27.26 47

42 * 53/100= 22.26 58 * 53/100 = 30.74 53

42 58 100

Calculation of Ψ²:

Observed Frequency (O)

Expected Frequency (E)

(O – E) ² (O – E) ² E

30 19.74 105.26 5.33

17 27.26 105.26 3.86

12 22.26 105.26 4.72

41 30.74 105.26 3.42

17.33

Ψ² calculated value = ∑ (O – E) ² = 17.33 E

Calculated chi-square value is 17.33

Tabulated value:

Degrees of freedom: d.f. = (r - 1) (c – 1) = (2 – 1) (2 – 1) = 1

Where r= No. of rows and c= No.of columns.

104


Tabulated Ψ² value for 1 degrees of freedom at 5% level of

significance is = 3.841

Since calculated Ψ² > tabulated Ψ² null hypothesis (Ho) is rejected.

And alternative hypothesis has been accepted.

INFERENCE: Thus, there is an association between the persons who are

planning to take an insurance policy in future and the persons who prefer

HDFC Standard Life Insurance to buy an insurance policy in the future.

4.PERCENTAGE ANALYSIS: This has been used here to calculate the number

of persons who wants HDFC bank to be their distribution channel in case of their

willingness to buy HDFC Standard Life Insurance.

Percentage Analysis: No. of respondents

Total no. of respondents

105


Out of 100 respondents, 47 respondents choice would be HDFC Standard

Life Insurance. Out of which, 40 respondents are preferring to buy from HDFC

bank itself. The percentage can be thus calculated as follows:

Percentage Analysis: 40 * 100 = 85%

47

INFERENCE: Thus it can be observed that 85% of the respondents are willing

to buy from HDFC bank in case of their choice will be HDFC Standard life

insurance. for obtaining a policy in the future.

106

FINDINGS, RECOMMENDATIONS AND CONCLUSION

5.1 FINDINGS

The increase in the revenue for the sale of insurance policies by HDFC bank

and the increase in the retail segment’s profit and assets indicates that the

financial performance of the HDFC bank in bancassurance has been good and

the bancassurance has also contributed well to the retail segment.

Though non-interest income as a % to operating profit,total revenue and

working funds were increased from 2004 to 2005,i.e., after the year they

started earning revenue from bancassurance,it has been decreased in the year

2006-07.With the increase in performance in bancassurance,the same can be

overcome.

It is desirable also that the bank can improve its existing performance to

increase its return on assets and to reduce the operating expenses of the bank.

Business per employee and profit per employee of the bank are decreasing

over the years that it can affect the sale of insurance policies that the bank’s

immediate attention is required.

Capital adequacy ratio has been found satisfactory, as it has been above the

prescribed norms of RBI that it reveals the potentiality of HDFC Bank to

perform bancassurance operations. The other prescribed norm, which is NPA,

also looks reasonable. But, steps can be taken to reduce the same, as its % to

customer assets has been increasing over the years.

Thus, it is quite clear that HDFC Bank is expected to take still more initiatives

to improve its existing performance in bancassurance. To analyse the ways

and means for it, responses are collected from the customers. It also indicates

the necessity of further initiatives and the areas where they need to focus and


can cash in on the situation for better prospects. Following are the

justifications from the primary data:

Though general opinion about insurance is pretty good among the people,

most of the respondents are uncertain about insurance as an investment option.

Though most of the respondents are aware of HDFC standard life, awareness

needs to be created about the fact that HDFC bank is cross-selling HDFC

Standard Life Policies.

Most of the respondents are not cognizant enough with the HDFC Standard

Life Insurance policies as the initiatives taken by HDFC Bank have been

inadequate. This is also proved statistically through correlation analysis.

Though the other relationship building factors are found satisfactory among

most of the customers, emphasis is needed in the area of Easy and

advantageous banking over other banks since it is denied by majority of the

respondents. As these factors, especially the easy and advantageous banking

determines the mindset of the customer in considering the bank as an

integrated financial solutions, this requires immense attention by HDFC bank.

The same is also proved statistically through correlation analysis.

Majority of the respondents are satisfied with the customer services provided

by HDFC bank that it is a positive sign for bancassurance.

53% of the respondents are not holding any life insurance policy so far that it

is clear that there are still lot of untapped source which the bank can explore

and reap the harvest.

47% of the respondents choice would be HDFC standard life insurance for

obtaining a policy. Out of which, 30 respondents are planning to take an

108


insurance policy in the immediate future .The association between this two is

also proved through Chi-square test. Tax benefits, better returns, invest in

child dreams, post retirement income, protecting the family in case of

unfortunate occurrences are the increasing order of preference in terms of

essentiality among most of the respondents in the near future for taking a

policy

And out of 47 respondents who are in favour of HDFC Standard Life 40

respondents i.e., 85% of the respondents prefer HDFC bank to be their

distribution channel. This clearly indicates the advantage the bank can make

use of and if taken more initiatives it can even make more customers to buy

HDFC Standard life insurance policies from HDFC bank

.

109


5.2 RECOMMENDATIONS

To strengthen the initiatives that are much needed to reach out more public

and to improve its existing performance, the following can be done;

The display case can be located on the place where the customers can have a

100% chance of looking into it like cash counters, entrance etc., The number

of display cases can also be increased and catchy slogans can be given.

To reach out more customers via website, HDFC bank can educate the

customer by sending frequent e-mails with attractive synopsis to the e-mail ids

of the customer about HDFC standard life insurance policies with the link

carrying them to the HDFC bank website. More pop-ups window, frequent

playing of graphical displays, can also attract more customers who are visiting

HDFC bank website.

Employees of the HDFC bank can also be given more training about HDFC

Standard Life policies, as this will help them to explain and guide the

customers better. Motivation, immediate rewards and better incentive

packages can also help them to do better. This type of enabling sales oriented

culture among the employees is the best possible way to increase the

productivity among the employees that it assumes greater significance.

Consequently the business per employee and profit per employee can also be

increased which is currently decreasing over the years.

Emphasis can also be given to promote insurance as an investment option as

most of the respondents are uncertain about it. This will also help them to

reach more customers.

Most of the respondents are satisfied with the customer services that it is a

positive sign. But, since customer satisfaction is no customer loyalty, they will

110


prefer to accept more products with the same bank only if they find it

advantageous. As most of the customers denied the easy and advantageous

banking in HDFC over other banks, it is important for the bank to find out

more ways to promote the same. This will definitely help the bank to convince

more customers to prefer HDFC bank as their one stop shop for all their

financial solutions.

Most of the customers prefer to buy insurance policy for tax benefits and

better returns that the target customers can be identified.

As many of the respondents who wish to buy HDFC Standard Life Insurance

Policy also have opted HDFC bank as their channel, the bank can make use of

it and retain its customers.

Thus by doing all this, the bank can increase its fee-based income, Return on

assets as well as the non-interest income, which leads to much progress of the

bank.

.

111


5.3 CONCLUSION

The study thus points out that the financial performance of HDFC

bank in bancassurance has been good and it also provides a helping hand to the

overall progress of the bank. The prospect for bancassurance is also bright as

HDFC bank is found to be a preferable distribution channel among the customers

who wish to buy HDFC standard life policy. With more initiatives and focus in

the specified areas the bank can even have the potentially of making more

customers to buy HDFC Standard Life policy from HDFC bank. With the merger

of centurion bank, it can also take the advantage of more customer base and can

become more competitive. Thus with its increase in the existing performance, in

the upcoming years, HDFC bank will definitely play a predominant role in the

bancassurance industry and there by can contribute more to the upliftment of the

bank.

112

SCOPE FOR FURTHER RESEARCH

As this study focuses only on the limited areas of chennai, it can be extended

to other areas for an in-depth analysis.

This study concentrates only on the life insurance segment that it can be

broaden by including non life insurance.

Comparative analysis can also be done among the performance of banks,

which undertakes bancassurance as this study focuses on the performance of

HDFC bank alone

.

.

BIBLIOGRAPHY & WEBLIOGRAPHY

BIBLIOGRAPHY:

BOOKS:

Reddy, T.S. & Hariprasad Reddy.Y,“Management Accounting”

Margham Publications, Chennai, 2005.

Lochanan Ravi .P “ Research Methodology” Margham Publications,

Chennai, Second Edition, 2003.

JOURNALS:

Amel Dean Barnes colleen, Panetta Fabio & Sallen Carmelo

“Consolidation and Efficiency in the financial sector: A review of the

international evidence”, Journal of banking and Finance Volume No:

28, March 2000,Page numbers: 2493-2519

Browne M.J & Kim.K- “An international analysis of Life insurance

Demand”, Journal of Risk and Insurance Volume No:60,January

1993,Page numbers: 616-634

Carow Kenneth. A “Challenging Barriers between banking and

Insurance”, Journal of Banking and Finance Volume No: 25,April

2001.Page numbers: 1553-1571

WEBLIOGRAPHY:

www.google.co.in

www.hdfcbank.com

www.hdfcinsurance.com

www.insureegypt.com

www.insuremagic.com

www.watsonwyatt.com

http://www.watsonwyatt.com/

http://www.insuremagic.com/

http://www.insureegypt.com/

http://www.hdfcinsurance.com/

http://www.hdfcbank.com/

http://www.google.co.in/

a study on bancassurance - final year proj

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