The partnership paradigm in banking and insurance

The partnership paradigm in banking and insurance | Insurance Business

The partnership paradigm in banking and insurance

Bancassurance, which brings together banking and insurance by harnessing banks’ branch networks to distribute insurance products, has enjoyed a resurgence in recent years, following several mega-deals, specifically in Asia and Europe.

Chubb, one of the world’s largest property and casualty insurers, recently established large multi-year insurance distribution partnerships with banks, such as Citibanamex in Mexico and DBS in Singapore. Insurance Business spoke with Sean Ringsted (pictured), chief digital officer at Chubb, about this emerging trend and how it can benefit both insurers and banks.

According to Ringsted, there is tremendous opportunity in this distribution channel, and a new paradigm is emerging as the financial industry further embraces digitisation.

“Banks and insurers have enjoyed a long and mutually productive and profitable relationship,” he said. “The offer of insurance products to bank customers has generated greater loyalty, trust, and value. But this is only the case when the insurance solutions complement a bank partner’s core products and services.

“Our partnerships with banks enable us to provide customised insurance products to bank customers at the points when they are most likely to need these peace-of-mind solutions. This type of partnership provides an opportunity to meaningfully improve bank customers’ financial security, lives, and businesses.”

Ringsted explained that bancassurance benefits banks by allowing them to offer insurance products and improve customer service to their large base of individual and commercial customers. This is alongside many banks’ efforts and investments to develop smart branches and digital banking. 

“This, in turn, helps to strengthen the customer relationship and helps to create a steady stream of non-interest income for banks,” he said. “It also helps to foster continued growth and relevance in an increasingly digital economy.”

Helping each other in a digital world
In 2017, Chubb signed a 15-year distribution agreement with DBS Bank, one of the largest banks in Southeast Asia, covering five markets – Singapore, Hong Kong, Taiwan, Indonesia, and China. Through this partnership, Chubb is currently distributing general insurance products on an exclusive or preferred basis through multiple DBS banking channels, including in-branch and various direct marketing channels. The products include property and casualty insurance products for small to mid-sized enterprises, as well as coverages for home, contents and selected personal accident and supplemental health (A&H) insurance products.

Read more: Chubb, DBS announce 15-year regional deal

“At a time when banks are looking for incremental revenue growth and to find ways to increase customer loyalty and stickiness, an insurance partnership can offer real value,” Ringsted said. “By partnering, banks and insurers can help protect the financial security of banking customers. This is ‘Bancassurance 2.0’ – a partnership generating value for both parties by offering digitised product and service.”

With customer expectations changing as the world becomes increasingly digitised, almost all financial services are being challenged to adapt. Banks and insurers are no exception, and Ringsted believes that the industries are likely to cooperate more closely in the future.

“Both industries are leveraging digital technologies to simplify and speed up online and mobile interactions with customers,” he said. “We stand at an important juncture today – positioning insurance and banking to meet the needs of customers today and into the future. If digital lives up to its promise, then the trend for more bancassurance deals will continue.”

Working with insurtechs
Insurance technology (insurtech) start-ups have multiplied in recent years, and their relationship with established insurance firms has often been framed as adversarial. However, Ringsted believes that with both incumbents and insurtechs working to their strengths, they can complement each other to meet customers’ needs.

He explained that insurance incumbents have undisputed advantages such as underwriting experience, risk appetite, balance sheets, and claims handling. Meanwhile, insurtech start-ups bring to the table innovative ideas for new products and distribution methods to create a digitised, more customer-centric insurance experience, but often lack the scale and resources offered by incumbents.

“Rather than conflict and disruption, incumbent insurers and insurtechs are increasingly seeing the value of collaboration,” Ringsted said. “Those insurtechs providing sustainable and significant added-value will have an important role to play in the digital ecosystem of the insurance industry and its partners such as banks.

“The digitisation of insurance is a tremendous opportunity for the insurance industry to modernise and deliver a more customer friendly product and service, in an economy increasingly shaped by technology, customer-centricity and new risks. While early days in adoption by customers, we know enough to see the vast potential for the digital delivery and service of insurance and that this is the path for the insurance industry of the future.”