The changing monetary climate in the nation has prompted a sharp change in the Indian financial services space. To remain on the ball, financial entities have taken on essential associations like Bancassurance for distribution. Bancassurance combines the assembling force and selling prowess of insurance with the distribution framework and open client base of banks. Insurance providers and banks unite to offer protection plans to expand stakeholder and customer fulfillment, further develop overall revenues, and tap into inventive distribution channels.
As per a report by the Internet and Mobile Association of India (IAMAI), the piece of the pie of Bancassurance in India expanded to 56 per cent from 27 per cent during the period 2011- 2019. Agency business declined from 42 per cent to 24 per cent. Further, the Bancassurance channel generates close to three-fourth of its premiums by selling unit-linked protection plans. Before Coronavirus, Indian insurers depended on Bancassurance channels to support sales. Nonetheless, COVID-19 shifted the business dynamics. Insurance sales were largely conducted over the web, prompting a sizeable fall in deals done through Bancassurance and advisors.
As the productivity of banks in the post- Coronavirus period is being tested, they will undoubtedly zero in on value-enhancing services. Bancassurance will assume a basic role in the development of the insurance business in India in the post-Coronavirus period. Apart from customers, even banks are keen to receive enhanced technological and advanced capacities from their insurance allies. It would require utilising pre-Coronavirus Bancassurance facilities with recently digitised insurance marketing channels to contact the suitable customer base with speed and cost proficiency.
It would be apt to say that any distribution channel has its set of benefits and challenges and Bancassurance is no different.
Extent of advantages include:
- Banks can generate risk-free income in the form of commissions paid by their insurance partners.
- Create an alternate channel of business by taking advantage of the current customer base.
- Optimise workforce usage and improve productivity.
- Enhance services through value-enhancing activities and initiatives.
- Offer an entire scope of financial offerings to deepen customer relationships.
- Access a different pool of customers’ latent, idle and untapped funds.
Challenges that need to be overcome:
- Bank representatives may not generally have knowledge about the insurance products. They primarily depend on the insurer’s personnel to generate beneficial outcomes.
- Since the advent of web-based banking, ATMs, telephone banking, and other digital interfaces, most customers can conduct banking transactions without visiting bank premises. Because of this, a big section of the customer base remains ignorant of the available insurance offerings.
- Bancassurance needs banks and insurance agencies to cooperate. While certain banks actually consider the insurance provider as competition, few banks may suggest a particular product over another.
Banks and insurance agencies need to sync their objectives to overcome challenges, decrease miscommunication and accomplish shared goals. Further, suitable training, precise coordination and clear communication can be established to give a justified push to the development of Bancassurance.
Also Read | Pandemic accelerated the digital journey of the entire life insurance industry – Vighnesh Shahane
Not long ago, insurance contracts were considered the privilege of financially well-off citizens. The introduction of Bancassurance made insurance accessible to individuals across different layers of society. In the post-Covid period, the alignment of Bancassurance with technology will assume a significant role in servicing claims and in nurturing the insurance buying experience for customers.
While having the option to tap the appropriate set of customers by attuning them to the moving correspondence modes might end up being cumbersome, insurance providers can identify practical mass-market offerings to meet the changing needs and clear the way for organised business growth.
Views expressed by – Subhankar Sengupta, Country Head – UBI & BroCA, IndiaFirst Life Insurance Company Limited.
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