Towards a win-win bancassurance partnership

Bancassurance, or selling of insurance through bank partners, is one of the most popular distribution channels in Asia today, as shown by insurers signing blockbuster long-term deals across the region. For many insurers and banks, this channel is a major revenue stream, but, of course, it is not flawless.

Insurers, who often shell out large amounts of money in such deals, must make sure that they are getting the most value and that the partnership with the bank is a win-win one.

Ajit Rochlani, senior engagement manager at Oliver Wyman, and Angat Sandhu, partner at Oliver Wyman, recently authored a report titled ‘Bancassurance in Asia: Delivering a step-change in value’, which found that while some partnerships have flourished, many have failed to live up to their promise.

The amount of money involved in these deals is no trivial matter – according to the report, there have been over 50 bancassurance deals signed in Asia since 2013. Of these, 15 have disclosed figures, totalling around US$6 billion in fees paid upfront.

With such large sums involved and the possibility of failure, one may wonder why bancassurance remains quite popular in Asia.

According to the authors, consumers find it convenient that they can meet more of their financial needs through their bank with which they have regular touchpoints.

“In Asia, the strategic importance of bancassurance has significantly increased in recent years for banks as well as insurance companies,” the authors told Insurance Business. “For banks grappling with a sustained period of low interest rates, it provides a source to strengthen earnings as well as an opportunity to deepen customer relationships. For insurers, it has become a material, and in many markets the largest, insurance distribution channel.”

Challenges to the bancassurance model

With Oliver Wyman working with various banks and insurers, the authors observed the following challenges for both parties:

• Mis-alignment of priorities – Insurance sales are one of many products that banks are responsible for and may not always get the attention that an insurer would like it to have. This challenge is typically compounded by KPIs of bank staff, where insurance sales may only be a very small component.
• Differences in culture – Insurers and banks are very different organizations given their different product sets and access to and relationship with the end customer. This can lead to differences in how organizations are run, the sales processes and who the customer is (the end consumer or the intermediary).
• Limited integration between bank and insurer systems – This could lead to a clunky customer experience for the insurance sales process. This is often made worse by insurers’ technology capabilities not keeping up with those of the bank.

Read more: Digitisation to boost bancassurance’s prospects

How can the partners make the most of bancassurance deals?

Sandhu and Rochlani identified six parameters that insurers should focus on to ensure a more successful bancassurance partnership.

1. Partnership alignment – Companies’ vision, culture, governance, and priorities must be aligned, with periodic honest assessment of the partnership.
2. Seamless customer journeys – Insurers must be integrated into the bank’s customer journey to deliver their desired customer and employee experience.
3. Embedding effective sales practices – Partners must clarify their roles and responsibilities on both sides and drive granular performance management.
4. Extending propositions and segments – Insurers and banks must work closely together to develop targeted propositions and extend coverage to all key customer segments.
5. Deploying targeted analytics – Insurers must work with banks to understand consumer segments and optimise lead generation, servicing and fulfilment.
6. Digital sales and ecosystems – The partnership must create a fully digital experience for customers and be present at all of a bank’s key digital touch points.

“We believe there is a strong future for bancassurance in Asia,” the authors said. “By effectively executing the suggested practices, banks and insurers can continue to accelerate value creation for themselves and continue serving the end customers in more meaningful ways.”