Bancassurance - The New Way

Bancassurance is an arrangement between a Bank and an Insurance company, through which the Insurer can offer its products to the bank's customers. Bankers know their customers’ needs well and there is already an inherent trust and relationship between them. This naturally puts bankers in an ideal position to offer right advice to their customers.

Evolution of Bancassurance

Initially pioneered by private insurers when the insurance sector opened up at the beginning of the millennium, the contribution of banks to the total new business of insurers has grown from zero to now over 50%. This has been a success story of growth and product and process innovation.

Over the years, the Bancassurance model has undergone several changes and transitions. For example, earlier banks could partner with only one Insurer in each of the Life/General/Health segments. Later, open architecture introduced by IRDA increased this limit to three. This helped to drive competition and innovation focused on customer centricity. Now, with IRDA focusing on rapidly increasing insurance penetration (currently around 4.2%) in the country, this arrangement has been further liberalized with banks being allowed to partner with 9 players in each of the Life/General/Health segments.

With Digitization, there have been significant changes in the Sales Process with Sellers now having to adapt to a “Phygital” approach. The face-to-face interactions and advice though remain relevant, and it is here that the Bank staff will play an increasingly influential role in advising customers on insurance and then recommending the appropriate insurer and insurance product. Their role will now go beyond just referring the customer to the insurance sales staff.

Opportunities and Current Challenges

With the IRDA-led policy enablement, there is an immense opportunity for insurers to grow the insurance pie itself, rather than get bogged down in just carving out a share of the wallet from existing business. But the challenge lies in reaching out to the customer base and having one-to-one conversations in this age of digitalization-supported self-service and reduced branch walk-ins.

How do Bankers then reach out to their customer base and have conversations around needs identification, and cross-selling Banking and Insurance solutions?

While Insurers and Banks have strategies to reach out to customers virtually, focusing on the Bank branch is critical. It is in the branches that the customer relationships get nurtured and Banks are able to embed more deeply with the customers’ personal and business banking needs. Each branch has a unique set of customers with their unique needs, so it makes more sense from a Products and Strategy stand point, to focus on the respective micro markets with their niche customer segments. A one size fits all approach is simply not going to work.

The next challenge that rises is, How do Insurers enhance their connection with the bank branches?

Insurers typically have relied upon the presence of their sales teams in Bank branches and on relationships with Branch staff to make customers aware of their insurance solutions. However, now with potentially 9 insurers of each segment vying for the Branch staff’s share of mind, and with the Bank staff themselves having multiple Core Banking priorities, the old approach of driving Bancassurance in the branches is not going to work. Insurance sales teams need to go beyond asking for leads and having transactional discussions around items like login days and low activation branches.

It’s time for Sales teams to run the Bancassurance business in a radically New Way – a systematic methodology that ensures that Insurers can stand out amongst the clutter and create a unique space for themselves as equals and true partners in their relationship with the Bank.

The New Way

The New Way needs the Insurer sales teams to look at each branch distinctly and craft unique strategies for each branch. Each branch needs to be treated like a “customer account” and the Insurer sales teams need to work on each branch in as detailed a manner as a company would do in a Business-to-Business environment - like a “Key Account”.

To start with, Insurers need to clearly:

?Step 1: Segment the Bank branches (and this is not the same as the typical Bank classification of its branches)

Once the segmentation is done, it will give a clear idea to the entire Sales hierarchy of the rationale and unique approach to be taken for each branch.

Step 2: Implement a clearly differentiated strategy.

Segmentation would help in identifying which branches need a “key account” management approach. Based on the segmentation, one of the following strategies, or a combination of them can be used:

i) Expand, ii) Penetrate, iii) Protect, iv) Maintain.

RAIN Group Branch Success Blueprint ? can empower Insurers to collect and analyze branch intelligence, measure and strengthen their relationship with the branches, set branch-specific goals/ mission/ KPIs, map out the competition, and have a targeted plan of action to seize any or all opportunities.

Branch Success Blueprint ? gives a unique yet dynamic approach to dealing with the changing ground realities in this space by focusing deeply at the branch level customer and branch staff needs.

In my next blog, I will discuss the Branch Success Blueprint ? in more detail. Please stay tuned in.

Till then, have a great day!