After bancassurance failed to take shape in Switzerland 20 years ago as part of the “Allfinanz” trend, the form of distribution is now going through a promising revival.
Fundamental change to the initial situation
As opposed to the first wave of bancassurance, banks are now fighting to stay “relevant” for their broader existing client base. The majority of banks are running a risk of being marginalized by fintech disruptors and other market players with even larger customer bases and higher client-interaction frequency (e.g. Amazon and Google as well as retail merchants such as Migros, Coop, etc.) or even being made obsolete through digital offers in finance.
Indeed, banks are scouring for new and attractive sources of income which (need to) go beyond their core banking business. For every physical interaction between a client and their bank in a brick-and-mortar branch, there are 500 digital interactions via smart phone or computer. This 1:500 ratio has developed over recent years and has dramatically changed bancassurance requirements. Until now bank client advisors have been the greatest obstacle for successfully implementing bancassurance activities. Today, advances in the digitalization of client interaction allow for the scaling (not cannibalization) of client advisors and their client contacts. In practice, however, bancassurance is still not used enough.
For their part, insurance companies are losing valuable client interactions due to increased competition from comparison portals and fintech companies. For this reason, they also have greater interest in entering into real cooperation with digital bank platforms in particular.
Banks should now completely reconsider their bancassurance strategies.
Not just life insurance…
While historically, life insurance products dominated the bancassurance scene — often for hedging (mortgage) loans — the banking channel is increasingly developing a broad range of non-life products (incl. home contents, personal liability, motor, legal expenses, travel insurance and even health insurance).
A treasure trove of data
Banks and insurance companies are sitting on an enormous treasure trove of client data that needs to be leveraged. As modern insurance companies are today able to provide individual protection modules in a timely and customized manner — thanks to combined data analysis, particularly also in connection with clients’ personal new life events — the banking platform for clients remains attractive for them and contributes to keeping the banking channel relevant.
The abundance of data makes it possible to personalize pricing for individual clients and thus to make more competitive offers to selected target groups — and this has a positive impact on the lead conversion rate.
The insurance business is also generally considered a “sticky business” and thus generates income for the bank long term.
Strategy and “leadership from the top”
Historically, bancassurance was integrated into the core strategy of very few banks and was instead offered opportunistically. This is one reason why the sales results in the sector are so mixed today.
Banks are notoriously busy working on a lot of run-the-bank and change-the-bank projects. Our experience from numerous projects shows that this is part of the reason why banks are reluctant to take on insurance-related digital projects. The success of these projects is ensured internally via two execution factors as a basic prerequisite:
1) visible integration of bancassurance into the banking strategy
2) clearly noticeable leadership and support of the project from the bank’s leadership
Simplicity of the action and first mover benefit
It’s hardly surprising that the chances of success for bancassurance projects are highest when the cooperation begins with simple insurance products / modules and iteratively build up to include more complex products over time.
For reasons of efficiency and business culture, the goals of automating the whole bancassurance process should be to ensure consistent processing from the point of sale (POS) through to the administration system of the insurance partner. As part of an omni-channel approach that clients expect, all possible access points are recognized as POS: from the bank branch, to mobile apps, bank websites, eBanking portals and call centers. At the same time, the relevant client and conversion data should be instantly fed back to the bank’s MIS.
As the leading strategy and management consultancy in Europe focusing on the financial services sector, zeb offers advisory services in the fields of bancassurance / omni-channel, sales training, customer journeys, hybrid customer advisory services and sales cost optimization—all the way through to providing turn-key solutions to the cooperation between insurance companies and banks.