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Digitaltransformation inbancassurance

Digital transformations in bancassurance

With the experience of numerousdistribution channel agreements behindthem, many insurers are beginning tolook at bancassurance as best meansto target new and emerging customergroups, channels and markets.Traditional insurers are looking at theupsurge in recent deals, alliances andpartnerships between the FinancialTechnology and the InsuranceTechnology sectors (referred to asFinTech), to examine and learn as tohow they can benefit from such dealsas well. Unsurprisingly, the number ofbancassurance agreements aregrowing around the world and isexpected to see a steady increaseespecially as the new and emergingmarkets have a clear focus towardsgreatly improving access and servicesfor the insurance sector.

As outright acquisition of capabilities, customers or technologies are not alwaysthe right option, insurers are focused on building strategic alliances andpartnerships that will help them to drive new growth, create new channels ofdistribution and drive innovation. Most insurers are moving cautiously in theirsearch for and finalisation of partners for their new approaches and new modelsof distribution in their quest for long term sustainable growth and valuegeneration.

There is no doubt in my mind that the future will be won onthe basis of the alliances, partnerships and joint venturesformed by insurance companies today. Anyone that thinksthey can survive on their own in this environment is foolingthemselves.

Gary ReaderHead of Global Insurance, KPMG International

The advantages of bancassurance forinsurance carriers

Insurance companies on their own cannot reach the levels of penetration thatbanks enjoy. Banks greatly enhance the market penetration of insurancecompanies without them having to invest in new branches or office infrastructurein hitherto untapped locations. A much higher market penetration is the foremostbenefit that insurers gain from a bancassurance partnership.

Higher market penetration

With the market penetration achieved due to bancassurance, the insurer’sobjective of increasing premium turnover is also easily achievable. For example:Max Life’s partnership with Axis Bank accounted for 55% of the insurer's revenuein the year after Axis Bank picked up a stake in Max Life. (Source: The EconomicTimes)

Increased premium turnover

The solid reputation that most banks have built for themselves over a number ofyears has led to an inherent trust in the banking system. In fact, the bank'sreputation was one of the top two reasons that surveyed customers picked forbuying insurance at the bank. Friendliness and attention given by the bankemployee at the time of purchase was another top reason for purchase ofinsurance at the banks. Using bancassurance as the driver, insurers can usecustomer confidence in banks to increase their range, penetration and premiums.

Increased customer trust

Top reasons for purchasing insurance at the bank

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35%

18%

11%

8% 5% 3%

11% 12%

13% 8%

28% 28%

35-4418-34Total

35%

20%

10%

7% 7% 8%

9% 11%

26% 18%

42% 27%

Recommendation

Brand reputation

Cost

Convenience

With the vast amounts of data available with the banks that relate to customerdemographics like financial information on earning and spending patterns, creditrepayment history, investment and repayment capacity, the insurers and bankscan work together to develop smart engagement workflows to identify and offerthe right insurance cover to every single customer.

Increased relevance of offerings

Based on insights of their partner banks, insurers can develop and launch newproducts in partnership with banks. These products can cater to the riskrequirements that banks see for their customers, which is possible because ofthe insights that the banks have into the data on the insurance covers that garnerthe most interest in specific customer segments.

Help with the launch of new products

The exponentially greater reach that bancassurance provides insurers comeswithout any increase in manpower because the bank employees are at theforefront of offering their customers the insurance products and closing the deals.This single channel therefore has a much greater reach and operational efficiencythan the traditional independent-agent framework had. The bancassurancechannel gives insurers a much wider reach with far less investment than anyother channel. For example: Max New York Life consolidated 60 of their branchesand closed down 140 to increase efficiency and lower operational costs after theirbancassurance agreement with Axis Bank.

Increased operational efficiency

With bank employees at the forefront of the workflow, the turnaround time is seento improve significantly. And this is a very important factor considered byprospective purchasers of insurance. In an E&Y bancassurance study undertakenin Brazil, the factor of a timely response was rated highly in the decision topurchase insurance.

Improved turnaround time

The entire process of origination, processing of applications, underwriting, riskassessment, fund management, delivery and claims is managed by the bank. Thisensures the entire customer experience is seamless and hassle free for thecustomer, as there is just one point of contact – the bank employee.

Customer delight

Digital rings in changes to customerpreferencesWhat was earlier perceived as enviable - a large network of branches in physicallocations, has lost a lot of its pre-eminence as customers show a markedpreference for digital channels and banks are also cutting down costs by reducingtheir network of branches. With customers visiting branches less frequently, banksdo not have as many opportunities as they earlier did, to offer insurance productsto their customers. Most customer visits to branches now, are mainly to resolveconcerns that they have. And this might not be the ideal time for banks to offer tofacilitate insurance covers for their clients.

Bank

FundManagement

Risk Assessment (Actuary)

ApplicationProcessing

Underwriting

Delivery

ClaimsProcess

Origination

A close coordination and collaboration between banks and insurers is a key factorin trouble shooting and streamlining the bancassurance sales and servicespipeline. For example, an ideal omnichannel strategy for insurance will need banksand insurers to work closely and in complete harmony to plan and deploy efficientand effective digital products and digital solutions to meet customer expectations.

With the rich insights that banks can garner from the extensive financial data oftheir customers, and their experience of customer behaviour over many years ofinteractions, banks can work closely with insurers to develop omni channelplatforms and offer bespoke insurance products that will benefit their variouscustomer segments.

Solving challenges through partnership

After having paid large sums of money to banks through bancassuranceagreements covering many years, many insurers might now wonder if they madethe right decision. However, the only option left to insurers now is to investsignificantly once again - to improve their own digital offerings to customers.Unfortunately this is not an easy task for them either as most of these digitalofferings are often way behind those of banks as a result of enormous changesrequired to the legacy systems that insurers are burdened with.

The solution to this new reality is for banks torestructure their branch models. The branchesneed to shift focus on to advisory services forwealth management and target specificsegments of customers. This is whereinsurance will find it’s new niche - as a part ofthe larger specialised offering that banks canpresent to the targeted customer groupsbased on an in-depth understanding of thecustomer, driven by customer analytics.

While both insurers and banks have their own intrinsic advantages, theircooperation in tackling the regulatory burden will ensure that they have a robust,data driven tailored and seamless offerings for customers. This will help them toleverage on their strengths to navigate the regulatory minefield and avoid the usualpitfalls of misconduct issues that often crop up today.

The collaboration between banks and insurers is critical tostreamlining of operating procedures. This facilitates hassle free datacollection and analysis, enables seamless customer referrals anddata retrieval. Customers will then have access to an effective andefficient single interaction with the insurer who has easy access to alltheir relevant data and they will not need to provide the same data todifferent departments, multiple times.

In order to make bancassurance work well for all the stakeholders, the underlyingobjective must be to build strong and unambiguous partnerships withcollaborative organisations. This might require that there are fewer partnershipsbuilt so that the stakeholders can concentrate all their resources to makesuccess of their investment deployment and efforts.

Some of the bancassurance successes include banks in India that offer insuranceproducts to their customers through online channels that are supported by callcentres. These initiatives have seen success, with a large number of life andtravel insurance products being sold via these channels. Other notable successeshave been seen with claims processing workflows where photographs taken withmobile phone cameras and real time AI enabled assessment being able to providemuch faster claim resolution to customers.

Digital transformation - The way forward for banks and insurers

Improve customerengagement and customerexperience by focusing onthe larger financialobjectives of different targetcustomer groups; example:planning for retirement,wealth management andfinancial planning for familyentities.

In order to retain thepossibilities of includingrelevant third parties forholistic customer propositions(example, for healthinsurance), a digital openstandards platform should beset up with the bank and theinsurer to support customeromnichannel access.

Leveraging on inherent technical experience and expertise along with a deepunderstanding of client requirements, the Neutrinos MXDP solution is a robust,high impact solution. With specialised solutions for the insurance industry,Neutrinos is helping leading insurers take impactful digital transformationdecisions. We are excited to help clients make this journey an ongoing success.Let us help transform your business through our truly transformational solutions.

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Reach out to our experts today.

The advisory role of thebranch staff must beaugmented integratingregulatory requirements toprovide customers with aseamless omnichannelprocess.

Customised insuranceofferings can be offered bysetting up relevant andcurated customer data setsto allow joint customeranalytics by the bank and theinsurer.

Neutrinos is a Multi-experience Development company that offers aplatform to ideate, transform, and build complex enterpriseapplications within days – or sometimes hours. Neutrinos isheadquartered in Singapore and has operations across South Africa,South East Asia, India, and the USA.

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