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Bancassurance in South Africa is expanding— yet significant cultural gaps remain between banks and life insurers

20 May 2010 Reinsurance Group of America, Incorporated (RGA)

Banks and life insurers in South Africa agree that bank customers are more aware of bancassurance today than they were three years ago, yet significant challenges remain as the two industries work together to sell insurance through banking channels, according to the 2010 South Africa Bancassurance and Credit Life Study “Bridging the Cultural Divide Between Banks and Life Insurers.™”

The study, sponsored by RGA Reinsurance Company of South Africa (RGA South Africa), was conducted by C F Effron Company, LLC, in the first quarter of 2010. It compared and contrasted the opinions of 18 banks and life insurers regarding various aspects of bancassurance. A similar bancassurance study in South Africa was sponsored by RGA in 2007.

In 2010, nearly 80 percent of the banks and 85 percent of the life insurers believed bank customers were “generally or highly aware” that insurance is sold in the banks. This is a 30 percent increase for life insurers and a 10 percent increase for banks compared to the 2007 survey results.

While bancassurance channel market share and customer penetration rates are increasing in South Africa, the 2010 South Africa bancassurance study found banks and life insurers still have significantly different and often opposing views regarding products, training, marketing, distribution and the use of technology. Of the areas that were evaluated, the number of gaps that were considered “extremely significant” increased nearly 50 percent in 2010 compared to 2007.

“RGA is investing heavily in bancassurance research studies around the world to better understand how to bridge the cultural divide between banks and life insurers,” said André Dreyer, Director of Market Development for RGA International Corporation. “The South Africa study indicated banks and life insurers must engage in more open and frequent communication to reduce the number of disconnects, improve areas of concern and increase institutional trust and confidence.”

Pg. 2/RGA 2010 South Africa Bancassurance Study

In the 2007 South Africa bancassurance study, banks were disappointed with the life insurers’ ability to provide simplified underwriting to support the transactional nature of the banking business. In 2010, that was not a significant concern and the spotlight shifted to perfecting the processes used to solicit sales and the use of profiling techniques to more accurately target bank clients.

“The study also highlighted other problematic issues between banks and life insurers,” said Carmen Effron, President of C F Effron Company, LLC. “The major concerns in 2010 included developing a common administrative platform between life insurers and banks sales personnel and integrating insurance into the bank’s customer database to facilitate sales and avoid redundant entry of data.”

Effron said gaps also exist between the parties regarding the effectiveness of inbound call centres and the sales effectiveness of independent brokers. “Still, the most troubling issue, and it is a recurring theme in every bancassurance study conducted so far, is that life insurers perceive that bank senior management is not committed to the bancassurance model.”

Johann van Niekerk, Head of Business Development for RGA South Africa, said RGA has conducted bancassurance research studies in South Africa, the U.S. and the Middle East, and additional studies are planned in Australia, Asia and Europe. “These studies help banks and life insurers continue meaningful discussions that will create a more efficient and profitable distribution channel,” said van Niekerk. “In the multicultural society that defines South Africa, despite its challenges, bancassurance is still an exciting development that continues to grow and transform in light of regulatory and technological changes.”

Quick Polls

QUESTION

There are countless articles written about South Africa’s poor retirement outcomes. Which of the following would you single out as the biggest contributor to local savers not accumulating enough to buy an adequate and sustainable pension?

ANSWER

Lack of personal accountability
Poor participation in formal retirement funds
Reluctance to seek financial advice early on
SA’s high unemployment rate
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