Banks and insurers: not all moonlight and roses in the relationship

The recent RGA Bancassurance Survey 2007 entitled Bridging the Cultural Divide Between Banks and Insurers, revealed some interesting facts about the relationship between banks and insurers and it would seem it is not all moonlight and roses.

A total of 17 insurers and seven banks participated in the RGA Bancassurance Survey 2007 and three of the banks and five of the insurers have exclusive arrangements. The survey showed that of the participants, four of the seven banks own an insurer while 10 of 17 insurers are not owned by banks.

More than half of the insurers and 71% of the banks use a combination of distribution methods. The length of time that selling has taken place through the bank channel is significant, with 38% of insurers and 43% of banks indicating more than 10 years experience.

Nevertheless, several insurers have entered the market in recent years, with 31% of insurers with one to three years experience in the bank channel.

Rationale

The survey indicates that banks view one stop shopping as the top reason to distribute insurance, while insurers consider fee income as the most important reason for banks to distribute insurance.

More than 83% of the banks felt that insurance was strategically important to strengthen and retain customer relationships and said that it was given serious economic support by bank management. Only 25% of the insurers agreed with this view.

Marketing and sales

Banks ranked the ability to provide simplified underwriting for products up to R300 000 in face value as the most important marketing and sales element. The insurers also rated it most important and indicated that they were satisfied with their ability to provide such simplified products. The banks, on the other hand, expressed their dissatisfaction with the insurers' ability in this regard.

The next most important element, as revealed by the answers to the survey questions, was point of sale underwriting and the ability to link insurance product recommendations to a client's needs based on planning tools.

Sharing data

The need to have the insurance database integrated into the bank's customer information file to facilitate sales and avoid redundant entry of data was a point of contention. The banks indicated that insurers are not supplying them with this service to a satisfactory level. The insurers appear to be aware of the problem, rating their own satisfaction with regard to this as low.

The ability to integrate insurance at the point of bank sales and access to a bank's client base were seen to be the most important factors in selling insurance to bank customers from the bankers perspective, and they indicated their disappointment in the insurers' ability to provide it.

Access to the bank's client base is rated very important by the banks, but less so by the insurers. However, the insurers are very dissatisfied with their ability to access this.

Perceptions very different

There is a huge disparity between the perception of insurers and the banks with regard to the time it takes for platform personnel to make a second sale after the first sale. Insurers indicated that 46% of platform personnel do it after one week and the banks indicated that the figure was 86%. The banks' indication that the average time for the next sale is short is consistent with the large volume of policies sold.

Admin and operations

In terms of administration and operational issues, both banks and insurers rated the ability to integrate products into the banks' procedures and systems at the point of sale as most important.

Insurers indicated that their ability to provide training to bank sales personnel is extremely important and lack of training support is regarded as problematic. Insurers rated accreditation, new product rollout and technology training at the point of sale to be more important than the banks. Bankers, however, are less content with the compliance and customer service training.

Over 50% of the banks and close to half of the insurers expressed concern regarding the number of well-trained agents that can be appointed at the bank.

Effectiveness

Lack of senior management commitment was seen by the insurers to be a significant obstacle to selling insurance to banks. The bankers did not perceive this to be a crucial obstacle.

The largest gap from the insurers' perception is the lack of access to the bank's client base for data mining and lead generation. Lack of institutional trust and confidence was seen by the insurers to be important, while the bankers felt that it was not.

The lack of wholesaler support and the failure to make insurance a preferred product and integrated into sales goals and rewards, as well as the competition with other distribution channels are a source of frustration to the insurers.