The hasty digital transformation is disrupting the traditional bancassurance model based on complex products and not-so-dynamic distribution. This is where you need to steer carefully.

According to recent research by McKinsey and Reinsurance Group of America, bancassurance is a distribution channel that is poised to become increasingly important. One of the key elements for growth and maintaining operational security here is digitalisation.

Between 2001 and 2017, Latin America, which led the growth of bancassurance, saw a 12% increase in premiums. In Asia, revenues from this channel grew by 9.2%. In Europe, between 2012 and 2019, life insurance premiums in bancassurance grew by 3.6% per year, compared to 3.1% in other channels. Non-life insurance premiums grew by 5.3% per year, compared to 2.0% in other channels.

Silence after the storm: online to the rescue

This state of affairs has been predominant in recent years, but what's next? Covid-19 hits in 2020, risk appetite is waning, resulting in bancassurance new sales declines of 20% to 50% year-on-year. We are entering a crisis situation to which the banks' response is to accelerate digitalisation. Insurers are taking the same step.

Get the latest Singapore corporate news stories for FREE

A Deloitte analysis shows that in the current pandemic situation, implementing technology solutions to improve operational efficiency as quickly as possible is planned by 47% of banks in North America, 40% in Europe and 37% in Asia.

Insurers and their IT providers must therefore expect banks to increasingly expect modern digital solutions that are quick to integrate. What can help with this?


Wind in the sails: what's driving digitalisation

McKinsey experts say that the sustainable growth of the bancassurance segment is determined by three factors: offer personalization, customer service level and omnichannel model use. Is this still true in a pandemic reality? And do the above factors translate into the digitalisation of the industry?

Insurance sold in the bancassurance channel is usually linked to financial products, which gives banks an advantage in being able to design offers that are tailored to the customer. Bankers also have another ace up their sleeves - which is the use of extensive data sets to personalize the offering. The ongoing mergers and the growing use of the internet are opening the door to accessing new customer bases. Ideally, the bankers would like to have a "single customer view" of all customer financial and insurance needs, based on efficient segmentation, and then adapt their offers accordingly. Banks are therefore simplifying their business models to accelerating the digitization of their services. And this is where insurers need to be careful, so that their systems keep up with those owned by banks.

Customers expect product offerings to be available in online channels, with seamless distribution conversion between different channels. This trend may contribute to the wider availability of bancassurance products, because the fact is that bank employees are quite reluctant to sell insurance. So the online distribution, with only offline support, is a kind of a lifesaver.

Rocks and shoals: react in time

The road to a digital future is not without obstacles. Unfortunately, the main obstacles seem to be encountered by both partners in areas that are crucial for success: dynamic product modelling, smooth implementation of omnichannel, data set management or bank-insurer integrations.

What makes the above so difficult? The complex processes of handling insurance may be to blame, as well as the fact that it has never been a priority for banks. However, at the current time, with interest rates at record lows, it seems that banks are appreciating bancassurance.

What may also be a problem is that insurance has been distributed for years mainly through specialized agent networks. So what will happen if insurers start focusing on bancassurance and direct distribution? Agents are looking for additional products, so they should be invited into the omnichannel world of bancassurance. By enabling them to cross-sell widely, you can benefit from their knowledge and experience. For this, you need exceptionally efficient technological tools.

The right course: quality first

According to Deloitte, advances in digital transformation may be pointless if parties fail to effectively master data quality. Without effective data management, they will not be able to keep up with the preferences of the modern customer who needs to be able to access data remotely and preferably with just one click. One-click products and the emerging line of so-called on-demand insurance are a challenge but also an opportunity for bancassurance. Bankers need simple and automated products that will reduce sales barriers. Here, however, you can run aground due to bank-insurer interaction issues.

We should have no doubt that bancassurance has great opportunities for development, and the key to catching the wind in the sails is digitalisation. Banks can gain additional sources of income. Insurers gain access to a new distribution channel. Customers can satisfy their needs in an even more professional way. Everyone wins here.

Author: Aleksandra Wołowska, Senior Business Consultant, Comarch

Explore Comarch solutions for insurance