The Hindu Business Line : Insurers prefer corporate agency tie-ups to referrals

According to Mr S. Muralidharan, Chief Sales Officer, SBI Life Insurance, corporate agency contracts are better because in such an arrangement customers deal with the bank employees whom they know well. Therefore, there is an element of trust. Bank employees are in a better position to understand the needs of the customer and serve them better. On the contrary, referral arrangements do not add value to the bank — it only lends its database to the insurer.

SBI Life Insurance has corporate agency agreements with SBI and its eight associate banks. Bancassurance accounts for 67 per cent of its total premium income, which is the highest among life insurers.

Dena Bank is a corporate agent for LIC in 125 branches and with Oriental General Insurance in 200 branches. Mr Arun Singh Barhat, General Manager, Dena Bank, said: "With corporate agency we can earn higher commission, without any capital investment. We are also able to dedicate separate staff for training. In the case of referral model, manpower shortage was a big problem."

Another advantage for banks is that the risk is borne entirely by the insurance company.

Mr Cherian Varghese, Chairman, Union Bank of India, said: "The growth potential of corporate agency system is immense because we can cross sell several products to our customers. Insurance agents sell only insurance or mutual fund products. We sell asset-liability and remittance products as well. The challenge is in enabling people to cross sell products." Union Bank of India has a corporate agency tie-up with HDFC Standard Life Insurance.

Innovation of products is also possible under the corporate agency arrangement. Earlier this month, UTI Bank entered into a corporate agency tie-up with Bajaj Allianz General Insurance. Apart from the standard insurance products of Bajaj Allianz, UTI Bank and Bajaj Allianz have also devised co-branded general insurance products, aimed at UTI Bank's large retail customer base. All these policies are expected to be available in over 200 UTI Bank branches within this year.

Mr Kamesh Goyal, CEO, Bajaj Allianz General said, "Our ability to meet the specific needs of banks such as designing customised products for their customers reflects our commitment to this channel."

Explaining why UTI Bank moved from referral system to corporate agency, Mr Hemant Kaul, President, Retail Banking, UTI Bank said, "Referral is a flirtation, while corporate agency will formalise the relationship. Referral is opportunistic. It could happen that neither bank nor the insurance company will participate. As against this, corporate agency requires dedicated manpower, career training and commitment."

Tie-ups are made after careful consideration of the reach and customer base of the banks. While public sector banks offer national reach, new private banks have a good customer base that can be tapped for personal insurance products.

Certain products may suit the referral system, while others suit the corporate agency model. According to Mr Rahul Sinha, Vice-President, Marketing, Kotak Life Insurance, "In the case of a retirement product, it would work in a fantastic way on a referral basis. But ULIPs would work better if it is a corporate agency."

Kotak Life has a tie-up with Kotak Bank.

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