A deeper look at the 2007 Bancassurance Survey

RGA Reinsurance Company of South Africa (RGA) presented the preliminary results of their 2007 Bancassurance Survey on 12 March 2007.

A total of 17 insurers and seven banks participated in the survey, which examined and attempted to bridge the cultural divide which exists between these financial services companies.

An understanding of these differences will further the mutual goal of increasing the size of the market serviced by the insurance industry. Credit life insurance was one of the big winners in 2006 with four of the banks surveyed selling more than 100, 000 policies, and two banks reporting more than R500 million in annual premium.

An extremely positive finding is that both banks and insurers intend expanding the range of insurance products offered for sale through the banking distribution channel.

Key motivations for bancassurance

The motivation behind using banks to distribute insurance products is viewed differently by banks and insurers.

Banks prefer to view the channel from a pragmatic or convenience angle and focus on the usefulness of a 'one stop shop' for their clients. Banks also viewed insurance products as an ideal opportunity to strengthen relationships and retain customers. This practice is not new to the financial services sector a larger product offering leads to a better chance of second and third sales as the customer becomes increasingly captive.

Insurers, on the other hand, feel that the primary motivation for selling insurance products via the banking channel is the fee income derived from this activity. This could link back to the fact that the clients won by insurers through the banking channel are arms length clients, in that insurers lack initial contact with them. Only 25% of insurers agreed that insurance was of strategic importance to banks.

Marketing and sales strategies

The survey revealed a big stumbling block with regards the ability of insurers to provide product which satisfied the banks' requirements. Banks feel that insurers have a way to go in providing a product which meets all their requirements while insurers believe they are already providing it. This obstacle relates to differences in perception and presents an opportunity for the two industries to cooperate in the future.

Future cooperation will have to be built around the jointly held requirement for a simplified underwriting process on insurance products with a face value of less than R300, 000. Both banks and insurers identified this as a top requirement in the survey.

It appears that the insurers will have to analyse their current bancassurance product offerings and tailor these to better suit bank requirements.

Obstacles to selling insurance to banks

There are a number of additional hurdles that the various players in this survey will have to overcome to ensure seamless insurance product sales through the banking channel. Most of these hurdles relate to perceptions held by the industries in question.

Insurers are concerned with the perceived lack of management commitment in banks, whereas banks feel this aspect is unimportant. In a similar vein, insurers are concerned with a lack of institutional trust and confidence in insurance products, while banks are again unconcerned. It seems these differences stem from regulatory activities in the insurance industry, with insurers justifiably concerned with the monitoring of, and 'correct' selling of insurance products.

This theory could also explain insurers' concern with the perceived lack of training and support for staff selling the insurance products in the banking channel.

RGA managing director, Conrad Backeberg concluded: "Now that we have identified what the barriers facing banks and insurers in this market are, through the survey, we can begin to surmount the identified obstacles through dialogue between these two parties."

Editor's thoughts: Government strictly regulates the insurance industry in an attempt to eradicate, amongst others, the miss-selling of insurance products. Do you think individuals selling these products through the banking channel come under similar scrutiny? Send your thoughts to gareth@fanews.co.za.