Bancassurance boosts access to insurance in countries with distribution constraints

May 25, 2012 - PRLog -- Bancassurance can boost access to insurance as banks have extensive distribution networks through which insurance can be readily channelled, said Ms Serap Gonulal, Senior Financial Sector Specialist at World Bank, at the 13th Asia Bancassurance Conference in Beijing on Wednesday. She said that access to insurance in many countries is restricted by limitations in appetite and distribution, which are often due to educational constraints and insufficient number and reach of insurers' representatives.
Markets where bancassurance has been developed extensively often achieve more than 40% of life sales and over 10% of non-life sales through the channel. In Portugal, the market share of bancassurance sales is as high as 88% for life insurance and 10% for non-life. However, bancassurance is "not an all-conquering solution" because the costs are typically higher than those of telephone or internet-based insurance sales, said Ms Gonulal. She noted that in the UK, bancassurance has limited success as there is a swing towards use of the telephone and the internet. "But the conclusion must be that bancassurance has major potential for promoting insurance growth in developing markets."

The importance of bancassurance and alternative distribution channels to insurers was highlighted by Ms Na Jia, Chief Marketing Officer, ReMark International, who shared a study which showed that the expected growth trends of agents' share of new business are "low" or "declining" in North America, Latin America, the UK, Europe, Asia, Australia and South Africa. Conversely, bancassurance and alternative channels offer promise as their growth outlooks were mostly "increasing".

While alternative distribution faces challenges such as rising costs of telemarketing and direct mail channels, increasing lapse rates and national "Do Not Call" legislation, there is a slew of advantages which include the sale of mainly protection products, high contribution to bottomline profitability and low capital requirements, she said. The key is to learn and adapt faster than others. "The only sustainable competitive advantage is the ability to learn faster than the competition," said Ms Na Jia, quoting Mr Arie de Geus, author of "The Living Company".

For bancassurance to create large value, banks and insurers will have to be on the same side, said Mr Alpesh Shah, Partner and Director, The Boston Consulting Group. This will require integration of insurer and bank. In product and sales, there should be joint product council and co-branded product brochures at point of sale, as well as governance integration from top management to frontline. On the people front, there should be collaborative target setting and business setting to get alignment on KPIs on new business and persistency.

If integration can be done successfully, the value of bancassurance for banks will be larger fee income from leveraging existing distribution channels and customer access, greater loyalty from customers with a larger offering and services, and faster breakeven for new branches. For insurers, there will be more business from leveraging banks’ existing distribution channels and customer access and usually more profits, said Mr Shah.

Organised by Asia Insurance Review, the Asia Conference on Bancassurance & Alternative Distribution Channels attracted 125 delegates from 22 countries and was sponsored by ReMark.

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