The Hindu : Andhra Pradesh News : LIC, Andhra Bank sign pact for `Bancassurance'

Online edition of India's National Newspaper
Friday, May 20, 2005

Andhra Pradesh

Andhra Pradesh

LIC, Andhra Bank sign pact for `Bancassurance'

Staff Reporter

`An attractive channel for banks to improve non-interest income'

HYDERABAD: The Life Insurance Corporation of India (LIC) has entered into a strategic alliance by signing a Memorandum of Understanding (MoU) with Andhra Bank for `Bancassurance' corporate agency.

The Life Insurance Corporation of India Chairman, R.N. Bhardwaj, said he expected a four-fold increase in first premium income (FPI) through alternative channels of distribution, including `Bancassurance', in the current fiscal. The LIC had earned an first premium income of Rs. 15,840.67 crores in the last fiscal with a provisional total income of Rs. 1,06,540 crores.

With LIC's growing partnership with 32 banks, they expected the alternative channels to contribute some five per cent of total business in the current year, as against little over one per cent in the last fiscal, he said.

The `Bancassurance' route was an attractive channel for banks to improve their non-interest income in the backdrop of falling treasury incomes and pressure on interest margins.

Saying that LIC distributed over Rs. 7,000 crores as commission to agents every year, Mr. Bhardwaj said even if banks succeeded in capturing 10 per cent of it, it would mean a revenue of some Rs. 700 crores. Banks had the advantage of tapping high-end customers and generate high sum assured business, he said.

Shrinking revenues

The Chairman and Managing Director (CMD) of Andhra Bank, T.S. Narayanasami, said changes in the financial markets in the last decade had shrunk revenues to banks from traditional business streams. The focus now was on fee-based income rather than fund-based income, he said, adding that as a new business line, `Bancassurance', could be a logical extension to the bank's existing services.

100-cr. premium targeted

The bank's Executive Director, R. Balakrishnan, said that in the first year of operations as LIC's corporate agent, the bank aimed to collect a premium of Rs. 100 crores and get an income of Rs. 17 crores he said.

The bank planned to take up `Bancassurance' initially at 200 out of its 1,168 branches and then extend it in a planned manner to all branches.

Printer friendly page
Send this article to Friends by E-Mail

Andhra Pradesh