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Is Bancassurance flavour of the Season?

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11 August 2010
Prathima Rajan
Bancassurance is growing in many Asian markets buoyed by deregulation of banking sector on one hand and Insurance companies intending to optimize distribution via banks on the other hand. On the local level, bancassurance business in Asia-Pacific countries has evolved in different ways. While different geographies are targeting different customer base and products, for instance countries like Malaysia, Indonesia, Thailand where Muslim population is high and growing, insurance companies are joining hands with banks to provide a wide range of Islamic finance and takaful insurance products. And in some other emerging economies with predominant agricultural countries like India banks are joining hands with co-operative societies and Regional Rural Banks to reach out to vast untapped population. Asia Pacific region is “Agent” dominated distribution in terms of both life and non life, however Bancassurance is growing quickly. Penetration of Bancassurance ranges from <10 percent in countries like Japan and Thailand to as high as 40 - 50 percent of new business in countries like South Korea and Malaysia The existing bank branches and other infrastructures like ATM, online, telephone, and mobile modes have triggered the insurance companies to come up with various innovative models in collaboration with banks to effectively use the already existing channels. Bancassurance is one of the growing models that insurance companies are targeting to reach various customer segments. Since bank customer are co-related to savings and insurance customers are co-related to retirement, pension etc, routing insurance products via bank branches will not only build long lasting relation with customers, but also act as one stop shop for all financial needs of customers.

Comments

  • Sorry to post a access question here, but I have been trying to get full access for some of the reports that you have for India, and so far I havent been able to get anyone from your team to respond.

    I have written to the analysts, and also the customer care email (info@) but with no luck.

  • Hello Ravi,

    Sorry for delay in replying to your interest. Is there anything in particular you are looking for, in terms of report? request you to kindly get in touch with Nick Bhock (nbhock@celent), he should be able to assist you.

  • Hi Prathima,

    Your view is quite on the dot. Traditional, Direct Agent driven aprroach for insurance distribution is not sufficient in the current times where product innovation can take you only to a certain level to gain mind/market share. If penetration is the name of the game, "alternative" channels are a must have to tap the distribution reach desired. However, when it comes to this, one aspect which probably is not given its due consideration is that the "sellers" in these alternate channels needs to be equipped differently as compared to their counterparts in the direct model. This specifically applies to Banks selling insurance. Tradintionally, banks are "solution providers" not sellers. While insurance is "a subject matter of solicitation" or in other words, Insurance is sold, not bought! This bring out a significant "cultural" disconnect in the way Insurance companies operate and how banks do, though both may deal in the same product viz. Insurance. Also, while the Insurers' perspective and the banks perspective are often tended to, the Customer angle is often overlooked. The banks customer should get a significant value benefit from pruchase of insurance through his bank, as compared to from his insurance agent cousin. This could be in the type of product, or price or payment options or combination there of.

    Its true the many Insurers have jumped on the Bancassurance model (even having JV companies with Banks), is real potential will be garnered only when there is a longterm vision on building a specific operational model for selling insurance through banks, from both parties. Else, the initial growth from a bancassurance kind of distribution will Plateau in as little as a year and both sides will have to face with unwated issues of mis-selling, frustrated sales force and above all, dis-gruntled Banking customers!

  • Dear Prathima,

    Came across your article titled - "Is Bancassurance flavour of the season?" while generally browsing through the net on bancassurance related news.

    Whilst it is a nice and short summary of banca in Asia, please pardon me for saying that I did not any relevance between the title of the article and its contents. In fact, I would have liked to read your views on why you think banca is the flavour of the season.

    Kind regards,

    Saju Paul
    Birla Sun Life Insurance, India
    Business Development, Banca

  • Hello Paul,

    Thank you very much for your feedback and i really appreciate your suggestion. The reason behind this title is the attention that bancassurance has got offlate by both banks and insurers emphasising on leaveraging the existing infrastructure to offer insurance products. As agent model is declining giving way for bancassurance every bank want to be part of this and therefor the title was phrased so....

    Anyways, I see your point as to why the same was not related to in the article.

    Regards,

    Prathima Rajan

  • Absolutely Ahish, i completely agree. We already evidence that Many to Many model is not sustainable in the long run (where banks tie-up with various insurance companies and offer several insurance products). This will result in lack of focus and dilution in product specialization, thus making the channel less effective.

    As the industry matures, the focus should be more on exclusive partnership, product innovation (bundling, whitelabeling etc) ensuring long term relationships with banks to make bancassurance more effective rather than focusing on short term commission or fees in the form of additional income.

  • Hello
    I work in bancassurance dept. in a commercial bank in Nepal.The dept. is quite a new concept for us and I feel that we are not able to attract more customers to get insured from us.Please I request you to suggest if there is any such strategies that make our bancassurance a great success.Let me mention that we have been using telemarketting method right now.

  • Hello Pranaya,

    Sorry for delay in replying to your mail. Bancassurance is a new concept for many banks in India but for a few major banks. Some of the strategies that might help you in taking bancassurance further is bundeling of products for instance, club home loan with mortgage insurance, auto loan with auto insurance etc. Bancassurance will take some time to gain popularity, meanwhile you guys can continue your sales efforts on telemarketing as well.

    Regards,

    Prathima Rajan