Chapter -1

Introduction

1.1 General Background

Bancassurance is the simplest way of distribution of insurance products through the bank
distribution channel. It is process of selling insurance products and services by leveraging vast
customer base of a bank and fulfills the banking and insurance needs of the customers at the
same time (Chowdhury, 2006).

In other terms, Bancassurance refers to banks acting as corporate agents for insurers to distribute
insurance products. Bank acts as a mediator between the insurance company and their customers.
Bancassurance has grown differently in different countries and taken shape according to the
demography, economy and legislative prescriptions in that country. The birth of Bancassurance
had taken place in France in 1980. It has also been activated in Europe as it inculcates the vision
of “one stop shop” (Agrawal and Hajela, 2011).

A broader definition of bancassurance was provided by Swiss Re (1992): “Bancassurance can be

described as a strategy adopted by banks or insurance companies aiming to operate the financial
services market in a more or less integrated manner”. Yuan (2011) Bancassurance is the process
of a bank selling insurance products manufactured by insurance subsidiaries that are owned by
the bank, either through its own distribution channels or through outside agents. Artikis et al.
(2008) state that the earliest recorded usage of the term “bancassurance” was detected in France,
in the 1980s where its appearance was associated with the development of the consumer and
mortgage credit as well as the liberalization of the financial markets. Established and successful
in Europe the concept is relatively new for Asian countries having emerged only in 2002 (Wu et
al., 2008).

Denial (1995) provided an analysis of how ‘Bancassurance’ products have evolved, which reflect
the way the concept of bancassurance itself grew. The analysis of denial is based on the French
market with reference to other European countries. Denial divided the evolution of
bancassurance products into three periods.
 - In the first period, prior to 1980, banks sold insurance guarantees that were a direct
extension of their banking activities, but were not associated with life insurance. For
example, credit insurance was regarded as bancassurance.
- After 1980, saving products that benefited from advantages tax regimes associated with
life insurance flourished in the banking markets.
- Around 1990, the supply of insurance products by banks became much more diversified
in both life and general insurance categories.

Bancassurance provides the several advantages for the employees of both bank and insurance.
For bank the productivity of the employees increases and improves overall customer satisfaction.
The banks selling insurance products help to increase in return on assets by building fee income
through the sale of insurance product. Similarly, for insurance companies the penetration of
bank’s branches in rural areas can be utilized to sell products in those areas can be the major
advantages. Customer database, already established customer relationship and the technology
used by banking sector also helps on growth of insurances sector. (Paramasivan., 2008) For the
following reasons banks are entering into Insurance business such as:

1. Wide network of branches- Banks can prove to be a vital distribution channel due to their
existing wide network of branches all over.
2. Customer database- Banks can utilize their existing clientele, which includes corporate
as well as retail clients to market insurance products.
3. Cross-selling products- In the current scenario banks can cross sell their products along with the
insurance products.
4. Fee based service- Insurance products can be sold as a fee based service. It means by selling
insurance products banks earn risk free fixed income which will be an additional source of
revenue for the banks.
5. Rural Penetration- The existing wide network of banks in rural areas can be utilized for selling
insurance products. It is easier for banks to tap rural market as the rural people have more
awareness and faith over banks as compared to Insurance companies.

Over the past few years synergy of bank and insurance has been an often talked about matter.
People use this concept by the term ‘Banc-assurance’ or ‘Assurance-bank’. To put these two
operations under one umbrella one need to know about their possible cohesiveness; otherwise
combining them would result into mismatch benefiting one at the cost of the other. Both banking
and insurance organizations are financial intermediaries but their intermediation pattern is
different by virtue of their operation. One channels the deposit from surplus household to deficit
households, while other reduces risk through the device of law of large number (Rose 1997).

The banking and insurance industries have rapidly in the changing and challenging economic
environment all over the world. Due to merging of global financial markets, development of new
technologies, universalization of banking industries and with expansion of non-banking
activities, the insurance industry has globally brought in new channels of distribution into
existence (Alavudaan and Rosa, 2015).

Insurance companies require immense distribution strength and tremendous work force to reach
out to a huge customer base. The insurance agent is no more the only distribution channel today
for insurance products. Thus, various insurance companies are proposing to bring insurance
products into the lives of the common person by making them available at the most basic
financial point, the local bank branch through Bancassurance (Lin.et al (2008).

There is an enormous scope for the insurance sector in Nepal. An alliance between the existing
19 commercial banks, 20 development banks and scores of finance companies with their huge
database can take care of the limitations of insurance agents selling products from house to
house. But to make bank employees interested in sharing this new work load of selling insurance
policies and make the new model work, banks need to offer an incentive to its employees by
sharing the revenue generated by the new business. Some banks in India have fixed a certain
amount of revenue for employees selling insurance products. However there is question on the
future of bancassurance in Nepal, where both the awareness and penetration of the insurance
industry is low, due primarily to Nepal’s geographical condition. Often hilly and remote in
nature, it renders the cost of insurance distribution excessively high. But some insurance pundits
are pointing to this low insurance penetration precisely that gives bancassurance its position and
future. (The Himalayan Times, 2006 oct 16)

According to the Beema Samiti, some financial institutions and Nepal Bank Ltd have been
involved in bancassurance for the last one year. Laxmi Bank Ltd (LBL) has become the first
bank in Nepal to start Bancassurance business. For the moment, Laxmi Bank and Standard
Chartered Bank claim to be the only two commercial banks in Nepal that have not just tied up
with insurance companies but have actually begun to sell products from insurance companies.
(The Himalayan Times, 2006 Dec.1)

1.2 Statement of the problem

The competitive nature of any market would ensure that the reduction in costs would results in
benefits in terms of lower premium rates being passed on the customers. For combining
insurance and banking activities, or cross-selling banking and insurance products through joint
distribution channels, afford a number of key benefits from both a business and financial
perspective. The bank network is spread across the length and breadth of the country. This
enables the insurance companies to reach out to each individual in the country who need
insurance. From the bank’s perspective, such a model offers a great opportunity to improve their
profitability by enhancing 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
(Saunders, 2004).

Benefits to insurers, banks and customers while using bancassurance as insurance distribution
channel vary. For Insurers base on the bank distribution network largely to increasing their
revenue through the banks and use the same customer base, economy in sales cost. For, the banks
will earn net income from insurers and increasing value to customer, strengthening customer
relationship, and work force utilization. And for customers will insured with reasonable premium
and security for their property or health that bank employee high skilled and trained to cross
selling insurance products, one stop shopping, customers does not have much time to select
insurers because the banks have agreed already with the good insurers (Noi, 2013).

The banking sector has achieved a deeper penetration especially within the rural areas, where the
insurance companies do not have branches. With increased integration of financial services and
banks seeking to expand the range of services offered to clients, a perfect opportunity exists for
the two sectors to enter into a bancassurance partnership (Jane, 2010).

The literature on Bancasurance indicates the success story of this new channel in most of the
European Countries. This is the favorable legal system in these western countries, which have
been supported by the availability of strong banking infrastructure. The concept of all financial
services under one roof and relationship banking have contributed a lot in building up of this
concept. The reputations of the banks have also played a key role in popularizing the concept of
Bancassurance in Europe. The tax incentives provided under fiscal measures also played an
important role in some countries. The success of Bancassurance depends on how the social and
cultural needs of the target populations are understood. In addition a major segment of Indian
population is understood. The research studies have shown, customer’s demographic data such as
income, education, life cycle, financial sophistication, age and gender can predict the probability
of acquisition of financial products and services and may affect customer’s likelihood of
purchasing another product from the same financial service provider. (Popli, 2015)

Cooperation between banks and insurance companies, initially limited to the distribution of life
products through bank branches, has gradually developed into a closer relationship, causing the
financial market to operate in a more integrated manner. Despite the existence of some
differences between countries, it is possible to sustain that simple distribution agreement during
the 1970s and 1980s became a mix of partnerships and share exchanges in the early 1990s. The
appearance of more complex and integrated models has not caused the disappearance of the
earlier forms (Fiordelisi & Ornella, 2010).

According to Lakhey (2016) Bank employees give less priority bancassurance and take as it
secondary function. The banks need to offer an incentive to its employees by sharing revenue
generated by new business. Additionally, there is lack awareness regarding insurance. In Nepal
banks receives fixed amount of revenue for employees selling insurance products. Otherwise,
they would not be interested in bancassurance.

According to Beema Samiti report, an alliance exist between131 institutional agents, which
consists Commercial banks, development banks and finance companies with their huge database
can take care of the limitations of insurance agents selling product from house to house. There is
a huge untapped insurance market in Nepal. Only 450,000 out of a total population of 26 million
have been covered by insurance. Many experts point out that, there is immense scope for the
insurance sector in Nepal.

Strong competition gave rise to innovative products and new channels of distribution like
bancassurance for the marketing of insurance products. So, for the development of
bancassurance in context of Nepal it is very important to study prospect of bancassurance. The
present study is analyzing the recent prospects of bancassurance, its impact on banking sector,
marketing and distribution. This research will deal with necessary factor for development of
bancassurance in Nepal. Though there are above mentioned evidences to analysis the factors
necessary to be prospects of bancassurance in the context of other countries, no such evidences
using the most recent data exist in the context of Nepal. Therefore, study deals with the
following issues:

1.2.1 Research questions

i. What is the level of awareness of Bancassurance in Nepalese banking industry?
ii. How distribution channel affects present status of Bancassurance?
iii. To what extent present status of Bancassurance is affected by customer awareness
iv. What is the impact of product design on present status of Bancassurance in Nepal?
v. What types of insurance products available for bancassurance in Nepal?

vi. Which popular insurance products that customers would like to buy through the banks?
vii. What are the criteria for the partner selection by bank for selling products of the
particular insurance company?

1.3 Objective of the project work

The major objective of this study is to study the prospects of Bancassurance in Nepal. The
specific objectives of the study are:
i. To study the impact of distribution channel on prospect of Bancassurance in Nepal.
ii. To analyze the impact of product design on prospect of Bancassurance in Nepal.
iii. To investigate the level of consumer awareness regarding Bancassurance in Nepal.
iv. To explore the major factor affecting partner selection for bancassurance in Nepal.
v. To find the impact of distribution channel, product design, consumer awareness and
partner selection on prospects of bancassurance in Nepal.

1.4 Organization of the study

The whole study is based on study of prospects of bancassurnace in Nepal. The study on
prospects of bansaccurance is composed of three chapters. The first chapter is the introductory
part of the study which includes basic information on background, statement of problem,
objective of the study, organization of the study, review of literature and research methods.
Moreover, second chapter is about data analysis and major findings that highlights data
presentation and analysis & major findings and discussion. Finally the third chapter includes
summary, conclusions, recommendations and scope for future research of the study.

1.5 Literature review

This chapter provides conceptual framework of the study and deals with review of empirical
studies. In terms literature review, “the literature” means the works the researcher consulted in
order to understand and investigate the problem of the study. “Review” is a process of
systematic, thorough and critical summary of the published literature in the researcher’s field of
study. A literature review is a concise overview of what has been studied, argued and established
about a topic. Many authors have given their conclusions on the similar study supported with
their findings. The result shown by one greatly supports or might vary with the other since it
depends on the availability of data and scope of the study. The reviews of empirical works made
on different periods along with major conclusions are presented in this section. It also entails
about the major findings as well as reviewing the tools and techniques used by the previous
studies.

The review of literature in the study has been organized as follows:

1.5.1 Review of major literature

1.5.2 Review of recent literature

1.5.1 Review of major studies

The major literature that has been reviewed in this study is presented in Table 1.1.

Table 1.1: Review of major studies

Major studies Major findings
(Schuster 2000) Life insurance companies establish a long-term relationship with their
clients. Banks can benefit from this relationship, and retain and
increase their customer base by offering life insurance products.
(Klein, 2001) The effort and expertise needed to sell a given product must be
appropriate to the skills and cost base of the chosen distribution method
was the major finding of the study.
Kumar (2001) Distribution channels should be integrated in accordance with the
established model in order to ensure cost saving and increased
productivity
Agarwal, V.K. (2004) His article briefly discusses the various channels of Distribution and
new avenue being explored by the new players in the insurance sector
Aggarwal (2004) Researcher emphasizes on the use of two staged procedure for
identification of Bancassurance partner, where the first stage will be
filtering process analyzing banks quantitatively with the help of
parameters chosen keeping CAMEL model as basis and second stage
will be of short listing banks on the basis of Compatibility Index.
Rajkumari (2007) Empirical study in order to find out customers’ attitude towards
purchase of insurance products and their knowledge regarding
Bancassurance formats.
Singhvi and Bhatt The study compared the various distribution channels for an insurance
(2008) company namely Agents (corporate and independent), Bancassurance,
and Retail sector, Brokers, Referrals, Financial planner and advisors

Schuster (2000) found that since life insurance contracts are long-term in nature, with terms
ranging from 10 years to 40 years and longer, this allows life insurance companies to establish a
long-term relationship with their clients. Banks can benefit from this relationship, and retain and
increase their customer base by offering life insurance products. The loyalty of bank customers
can be increased many fold by offering a diversity of financial products. Banks need to consider
the customer's profile in order to determine the type of product that is most suitable for the client.
If the profile of the customer is taken into consideration, the bank will have a better chance of a
sale.
Klein (2001) the decision on the types of insurance products which it wants to sell is very closely
bound up with the methods of distribution which it plans to use. This is because the effort and
expertise needed to sell a given product must be appropriate to the skills and cost base of the
chosen distribution method. As the products moves from simple to complex, the sales force effort
of the distribution channels moves from passive to active. The type of distribution channels that a
company uses affects the design and pricing of its products, as well as the way in which the
products are promoted and perceived in the marketplace. It seems very difficult for a single
distribution channel to successfully reach the bancassurer’s goals and specific target markets.
Many bancassurers are using multiple distribution channels.

Kumar (2001) discussed various distribution channels in bancassurance namely career agents,
special advisors, salaried agents, platform bankers, brokerage firms, direct response, internet and
E brokerage. Merits and demerits of all channels have been discussed and it has been suggested
that (i) banks should go for technological advancement so as to use the bank database of
customers effectively (ii) cultural conflicts between both partners should be ironed out by
ensuring full commitment from staff in selling insurance (iii) technology must be combined with
fundamental knowledge of insurance to develop processes, unique to the banking environment
(iv) bancassurance strategies must be driven by customers and channels and emphasis should be
upon leveraging the bank's competitive strengths (v) Distribution channels should be integrated
in accordance with the established model in order to ensure cost saving and increased
productivity.

Agarwal, V.K. (2004) in his article briefly discusses the various channels of distribution and new
avenue being explored by the new players in the insurance sector. He states that a customer may
have expectations like value added services, development of new products, technology
insurance, solvency, financial security, quality trained staff etc. Though customer satisfaction
may be provided by maintaining high professional standards and rationalized procedures etc., yet
it requires new paradigms. In short, customer care is an approach of non-stop caring where only
those companies will survive, which can respond to the customers’ needs faster and better than
others.
Aggarwal (2004) discussed the experience of Bancassurance across the globe and in India,
Benefits associated with it, odes of entry into Bancassurance and various delivery routes
available. Researcher emphasizes on the use of two staged procedure for identification of
Bancassurance partner, where the first stage will be filtering process analyzing banks
quantitatively with the help of parameters chosen keeping CAMEL model as basis and second
stage will be of short listing banks on the basis of Compatibility Index. Researcher has explored
effect on the likely hood of improvement in the bank’s performance while taking indicators from
CAMEL Model. It has been laid down that an effective Bancassurance Model will lead to
increase in Capital adequacy ratio, gearing ratio, Return on assets , Business and profits per
employee, earning per share ,Net Profit ratio, Credit Deposit Ratio, Liquid asset ratio and
decrease in Nonperforming assets, Staff Cost and office Cost respectively.

Rajkumari (2007) carried out an empirical study in order to find out customers’ attitude towards
purchase of insurance products and their knowledge regarding Bancassurance formats. A sample
of 100 respondents was taken from Centurian Bank of Chennai and descriptive statistics along
with Chi square test had been applied to check awareness and preference level of the
respondents. The results revealed that (i) 64 percent of respondents were aware about Centurian
bank’s tie up with insurance companies. Telecallers on the part of banks was reported to be the
main source of awareness. (ii) Health insurance by ICICI was the most preferred in non-life
insurance policies. Chi square test suggested low correlation of Bancassurance clients with
Centurion’s bank accounts. Hence the study concluded that level of awareness about
Bancassurance should be worked upon to improve insurance penetration level.

Singhvi and Bhatt (2008) compared the various distribution channels for an insurance company
namely Agents (corporate and independent), Bancassurance, and Retail sector, Brokers,
Referrals, Financial planner and advisors. In addition to it Bancassurance has been regarded as
Win- Win situation for insurance company as well as for Bank. Cultural integration,
communication, technological incompatibility, MIS reporting, proper training of bank staff,
appropriate products and clearly defined rules and responsibilities have been treated as key
success factors for Bancassurance. Finally insurance companies’ channel members are advised to
avoid forced selling and to equip themselves with proper knowledge to advice prospect.
1.5.2 Review of recent literature

The review of recent literature is summarized in table 1.2.

Table 1.2: Review of recent Studies

Recent studies Major findings

Twardy (2009) The finding of the study identified responsible, accountable,

consulted, informed, financial resources of the partner as the factor to
be considered while selecting partners.

Kumari (2012) The study shows maximum numbers of respondent were aware about
the bancasurrance products.
The study indicates companies reliability, direction of business,
Hanna and Amina
transaction cost, territorial cost, image and reputation of companies
(2013)
are the major criteria for partner selection for bancassurance.

Ghimire (2013) Studied Bancassurance: a tool of integrating insurance and banking

industries on which he provided a better understanding of
Bancassurance in Nepal.
The study found the awareness level of the bank customers on
Sreedevi and
Bancassurance was low.
Auguskani (2014)
Alavudeen and Rosa
The prospect for bancassurance is positively affected by distribution
(2015)
channels.

Twardy (2009) the important findings of the study are 39% of the cases alliance success could
benefit from an improved partner selection process. Regarding the partner selection criteria
companies use, financial resources of the partner (ROI, financial health) is the criterion that is
most important for alliance success. Companies that use this criterion are more successful than
companies that do not use it. 46% of the respondents use a formal, structured partner selection
process .Standardized governance of the partner selection is another important success factor for
partner selection. Companies need to clarify who is to be responsible, accountable, consulted,
informed in each partnering phase.

Kumari (2012) studied the customer attitude towards bancassurance in India. A sample of 115
bank customers has been taken from 10 different banks of India. Respondents have been asked
about their source of awareness regarding bancassurance and to mark the reasons for buying
insurance from their bank rather than buying it from insurer. Results shows that maximum
number of respondents (91percent) marked bank as the source of awareness about banks selling
insurance, followed by advertisement (83 percent), bank staff (71 percent), internet (68 percent)
and friends (57 percent).

Hanna and Amina (2013) When choosing a partner, it is important to analyze the impact of a
number of criteria that will significantly reduce the risks of joint venture:

-Companies’ reliability: Only reliable company can be chosen for the partnership, otherwise any
problems of a partner company (financial, organizational, and managerial) may adversely affect
the joint business conducting.

- Direction of business: Partners should focus on common lines of business, for example retail
bank - retail insurance company. It will be easier for partners to build a business together with
experience in the same market segment. However, there may be adjustable cases. If retail
insurance company wants to enter the corporate market it has to be integrated with the corporate
bank.

-The transaction cost: The size of the required investment in the acquisition of a company or
joint venture organization is very important when choosing a partner. It is necessary to assess the
effectiveness of planned investments and the term of recoupment.

- Territorial location: Large banks and insurance companies, as a rule have an extensive network
of branches on the most territory of the country. Regarding to this fact, the coincidence of the
branch networks of partners is very important as it can help to organize joint work in a short
time.
- Image and reputation of companies. The presence of a positive image and reputation greatly
reduces the risks of doing business together, since there is no need to overcome the negative
attitude of company’s clients to its partner.

Ghimire (2013) studied Bancassurance: a tool of integrating insurance and banking industries on
which he provided a better understanding of Bancassurance in Nepal. He highlighted that there is
huge network of banking industry in Nepal. Thus, banks can play effective role to promote the
insurance industry market in future, if the regulatory and economic environment creates the
conducive milieu and comfortable workable situation.

Sreedevi and Auguskani (2014) examined the awareness level of the bank customers on
Bancassurance. The survey was conducted to study penetration of Bancassurance in Indian
market. Only the 38% of the people had taken the Bancassurance policy from their respective
banks. About 50 percentages of the respondent believe that private sector banks are better in
bancassurance, because of the quality services provided by them and the aggressive selling
policies adopted by the private sector. 32 percentages of the respondents felt that foreign banks
would perform better with the aggressive selling strategies and proper management.

Alavudeen and Rosa (2015) Bancassurance has a bright future as it offers insurers a readymade
distribution platform with a tremendous distribution network. “Growing Role of Bancassurance
in Banking Sector”, found that the insurance industry in India had been progressing at a rapid
speed since the inception of this sector. There will be a bright future for bancassurance in the
Indian insurance market

1.6 Conceptual framework

A conceptual framework is an analytical tool with several variations and contexts. It is used to
make conceptual distinctions and organize ideas. Guided by the literature survey and the
requirement of the study, the following conceptual model is developed. The study has taken
prospects of Bancassurance as dependent variable whereas product design, consumer awareness,
distribution channel and partner selection as independent variables in order to measure the
prospect of bancassurance. This conceptual framework describes prospect of bancassurance in
Nepal. Figure 1.1 presents the schematic diagram showing relationship between selected training
variables and employee
Figure 1.1 Conceptual Frameworks

The conceptual framework of this study is shown in figure 1.1

Independent variable Dependent variables

Distribution channels

Prospect of Customer awareness

Bancassurance
Offered products

Partner selection

1.7Operational definitions
1.7.1 Bancassurance
Wever (2000) refers to bancassurance as the distribution of insurance products through banking
networks; in other words, as the collaboration between banks and insurers to distribute insurance
products to bank customers. Bancassurance simply defined as distribution of insurance products
through network of Banks. Many Banking Institutions and Insurance Companies have found
Bancassurance to be attractive and profitable which complements to the core business.
1.7.2 Distribution channels

This is a fundamental factor in establishing a relationship and, therefore, a sense of trust and
loyalty. The type of distribution channels that a company uses affects the design and pricing of
its products, as well as the way in which the products are promoted and perceived in the
marketplace (Klein, 2001). Bancassurers make use of the following distribution channels like
career agents, salaried agents, direct response and bank employees.

- Career agents: Career agents are usually full-time commissioned sales personnel
holding an agency contract. They are generally considered to be independent contractors
i.e. an insurance company can exercise control only over the activities of the agent which
are specified in his contract.
- Salaried agents: Salaried agents have the same characteristics as career agents. The only
difference in terms of their remuneration is that they are paid on a salary basis and they
receive incentive compensation based on their sales.
- Direct response: In this channel no salesperson visits the customer to induce a sale and
no face-to-face contact between consumer and seller occurs. The consumer purchases
products directly from the bancassurer by responding to the company’s advertisement,
mailing or telephone offers.
- Bank employees: In this channel no salesperson visits the customer to induce a sale and
no face-to-face contact between consumer and seller occurs. The consumer purchases
products directly from the bancassurer by responding to the company’s advertisement,
mailing or telephone offers.

H1: There is positive relationship between distribution channel and prospect of

Bancassurance in Nepal.

1.7.3 Customer awareness

H2: There is positive relationship between Consumers awareness and prospects of

bancassurance in Nepal.

1.7.4 Partner selection

A bank having substantial customer base, brand image, long term commitment, established IT
infrastructure, good number of branches etc. could be a right partner for an insurer. On the other
hand, an insurer having product innovation, product exclusivity, long term commitment, high
commission, company image etc. could be a right partner for a bank.
H3: There is positive relationship between partner selection and porpect of bamncassurance in
Nepal.

1.7.5 Offered product:

H4: There is positive relationship between offered products and prospect of bancassurnace in
Nepal.

1.8 Research methods

Research methodology is a systematic way to solve a problem. It is the study of methods used by
which knowledge is gained. It refers to the various sequential steps that are to be adopted by a
researcher during the course of studying the problem with certain objectives. Its aim is to
provide the work plan of research. In other words, research methodology describes the methods
and process applied in the entire aspect of the study. It systematically solves the various
sequential steps to adopt by a various author in studying problem with the objectives in view.
This chapter is to outline the nature and sources of data, sample selection and classification of
variables, validity and reliability test, techniques and steps adopted in interpreting and analyzing
the data.

1.8.1 Research design

Research design is a detailed outline of how a research study will take place. It will typically
include how data is to be collected, what instruments will be employed, how the instruments will
be used and the intended means for analyzing data collected. The study has employed descriptive
and causal comparative research design to deal with prospects of bancassurance in the context of
Nepal. This study has adopted descriptive research design for fact finding and identifies
information about factors affecting prospects of bancassurance in Nepal. This research design is
process of accumulating facts and describes phenomenon as it exists. Descriptive research design
helps to reduce data into controllable form. It is used to depict the accurate results and further
describe about the characteristics of the sample.
Causal comparative research design helps to investigate the possible factors affecting the
prospects for bancassurance. This research design is used to find out the cause and effect
relationship between prospects of bancassurnace and factor affecting bancassurance variables
(distribution channel, customer awareness, product offered and partner selection.)

1.8.2 Sources of data collection

This study is based on primary data. The primary data and information is collected and analyzed
to determine prospects of bancassurance in insurance companies in Nepal. This study collect data
from structured questionnaire survey which contains the respondent related information through
tick mark questions, and 5-scale likert scale questions and data are analyzed in descriptive and
causal comparative method. The relationship between dependent and independent variable are

analyzed in multi-step regression analysis .

1.8.3 Instrumentation

To collect the data survey was carried by distributing a set of structured questionnaire to the
employees of bancassurance department of banks. The primary sources were used to extract the
information from the employees regarding the various factor determining the prospect of
bancassurance in Nepal.
The study is based on the primary data. The data obtained from the questionnaires survey are
analyzed through SPSS. The instruments are descriptive statistics and inferential statistics.
Frequencies, percent, mean, medium, standard deviation, correlation and test of significance are
used in this study to measure the determinants of prospect of bancassurance. To achieve the
purpose of the study, structured questionnaire was prepared. The questionnaire was formulated
out of the concepts that were raised in the review of the literature. The questionnaire is divided
into two sections. The first section, ‘A’ is about the respondent information including basic
demographics information of the respondents. “Section B” is about likert type questions about
factors determining prospect of bancasurance in Nepal scale ranges from 1 (Strongly disagree) to
5 (Strongly agree).

1.9 The Model specifications

The econometric models used in this study tries to explain prospects of bancassurance in Nepal.
This study uses least square regression model to test which of the hypothesis are consistent with
data. As each hypothesis in this study imply unique time-ordered and signed relationship,
regression model may help to indicate which of the hypotheses are generally consistent or
inconsistent with the data.

1.9.1 Model

This study aims to study the factors that determine the present status of Bancassurance in Nepal.
In this study, model has been used to test the theoretical relationship of factors influencing
Bancassurance. Different factors influencing Bancassurance are distribution channel, customer
awareness, product design and partner slection. The regression model used in this study is:

PA = a+ Dc + b2Ca + b3Pd + b4Ps + e

Where,
PA= Prospect of Bancassurance
Dc= Distribution channel
Ca= Consumer awareness
Pd= Product design
Ps= Partner selection
e= error
a = slope
b1, b2, b3, b4= coefficient of variable
1.9 Limitations of the study

The major limitations of the study were as follows:

i. The study was predominantly based on primary source of data regarding the success of
bancassurance in Nepal. Therefore, the reliability of the results derived from the study
depends upon accuracy of the information provided by the respondents.
ii. The survey was conducted only within the Kathmandu valley. Hence, the study did not
incorporate respondents from all over Nepal.
iii. The study was based on the assumption of linear regression between the dependent and
independent variable. The study excluded the non-linear regression assumptions.
iv. There is very short time for conducting the research study. The significant size of sample and
observations in this study were only from commercial banks. It did not include other
financial institutions like development bank, finance companies and micro finance.
v. Most of the findings in this study are not consistent with many of the studies. Therefore, it is
worthwhile to note that nature of data and specification of the models may themselves be
responsible for the difference in results.