Online published on 28 February, 2020.
The Indian economy has travelled a long way from a restricted close economy during 1950s to an open and liberalized economy as witnessed right now. The change has not happen in one single day as it took almost 40 years to bring the necessary changes for the bilateral growth of the Indian economy vis-a-vis world economy. During the restricted close economic phase most of the industrial growth was in the hand of government and entire focus was given for the growth of industrial sectors and infrastructure development. It was an era of planned development and under various planning period the belief was that the growth at the higher level will ultimately ‘trickle down’ to the lower level of the society and thus this growth model was known as ‘trickle-down theory.’ But the theory was not sustained as it failed to provide the desired result. But it was only during late 80s the policy makers decided to accept the role of other sectors other than industrial sectors for the better mentand overall growth of the Indian economy. Traditionally, Indiais aagrarian economy so role of agriculture sector can't be underestimate but along with these known areas the other major area which started showing its result is service sector. Service sector due to its low capital investment and high return has shown its impact and among various service sectors in service industries, financial sector make a significant progress in terms of overall economic development of the country.
The nationalization of banks gave the much needed capital to the industry where flow of fund was restricted and the industry made a significant impact to build the economy. Although in case of India, banking sectors has shown signif icant progress, but the same has not been witnessed incase of other major sector i.e. insurance. The establishment of LIC in the year 1956, was the first step in this regard, but it was not possible for a single company to cover the geographical spread of the country. So, the sector has still remains untapped. The opening up of the insurance sector brings the much needed development and expansion but the sector still not growing at a desired level. Being in the service industry, it is expected that selling a product which is not visible is very diff icult to its targetgroupofconsumers. This bottleneck generated the demand foravalue-added specialized services where emphasis is given on personal selling or customized selling.
The one to one approach to sell the product is vastly different from mass selling which is a key point of difference with other industries that are basically deals with physical products. This clearly indicates that a huge manpower requirement becomes essential for the growth of the sector. But unfortunately where 70% of the population is still leaving in rural areas, reaching to those target consumers with the help of agent based model becomes impossible. So, this raises the issue where demand for innovative distribution becomes the most talking points. The entry of private players have made a significant change in the mode of operations and they have decided to develop a new model of distribution called bancassurance with the help of which they are able to reach to mass consumers with the help of bank branches. Although the concept of bancassurance is not new in most of the developed countries but the concept was new when it was introduced by private life insurance companies in India. The basic motive behind implementation of thisdistributionstrategiesarecostand trust. It isdifficult for these new players to establish its own branch to expand the business at one go as the insurance market is not matured enough in India. As, the industry requires some breathing ground, investing a huge amount of money for branch expansion was not a very good idea for these new players. So, they have decided to capitalize the existing bank branches which spread over each and every segment of the country. A readymade distribution channel like this is very hard to ignore. This is what we are talking
about the cost aspect. But cost is not the only criteria in this regard as most of the private players do not enjoy the trust as compared to banks. But in insurance business trust is the only important criteria which carry lots of weightage. This peculiar situation also forces the companies to take the leverage of trust which is enjoyed by the banks.
Thus, overall we can say that bancassurance is a distribution model which has been implemented in such a manner so that each and every stakeholder will expected to get a positive return of the same. But the question remains about the effectiveness of the model. Starting from the year 2000till date, almost each and every literature tries to focus on the advantages and disadvantages of the model. But the actual beneficiaries, i.e. the consumers view point may not have been touched in that manner. Thus, the article would like to highlight on that issue about effectiveness of bancassurance from the view point of consumers. The study is exploratory in nature and the purpose is to identify the variables in this regard which can be further utilized for a more conclusive research.
