Banks and insurers showing a united front
Attendees at the RGA Client Seminar, held in Johannesburg on 1 November 2011, were treated to a preview of the reinsurer’s RGA 2012 South Africa Bancassurance Survey. The survey reflects the views and opinions of 11 large banks and insurers active in Sout
Among the latest survey findings is a greater alignment and improved communication between bank and insurer. The insurers typically compensate banks by way of commission, though profit share and dividends also feature strongly. “Bancassurance, by and large, is profitable good business,” observed Van Niekerk. Survey respondents indicated that the bancassurance operations were either more profitable, or equally as profitable, as the other lines they operated in. That said, it seems the profits generated from this insurance segment have declined over the years, perhaps as a result of the 2007 Banking Commission, the National Credit Act and rising consumerism.
Relationships drive insurance sales
What do insurers consider important when entering into strategic insurance partnerships with banks? “By and large it really has to do with knowing your customers: customer retention, demographics, the ability to integrate, distribution, prior success in market and scale,” said Van Niekerk. “What insurers are looking for from bank distributors is someone who knows their client very well – a requirement similar to that exhibited internationally in the affinity business space”.
The functions picked up by insurers and banks vary from one arrangement to the next. In the credit life space insurers are tasked with back office administration including claims assessment, claims payment and certain segmentation functions. Banks and insurers in this space tend to share the client side and customer services responsibilities. RGA’s latest survey also confirms that insurers are moving into the transactional non-advised product space… They still perform the back office function but become more involved in customer service, marketing and underwriting. In the fully-advised product category insurers perform virtually all the function, though banks still handle compliance and customer retention.
Distribution in the bancassurance space
Call centres (telesales) are singled out as the top distribution channel for bancassurance products, followed by low advice in-branch sales staff. Financial intermediaries remain popular, occupying third (advisory tied agency force) and fourth (advisory independent brokers) in the survey. Commission features as the most popular method of remuneration but there has been a definite shift towards salary-based compensation in the telesales and in-branch sales distribution channels. Van Niekerk observed a growing disconnect at branch level where branch managers were incentivised while the people doing the selling were not. Going forward participants believed that outbound calls, branch consultants, agents in branch, internet sales, tied agents and independent brokers would emerge as their most important distribution channels.
The agents in branch category warrants further investigation. “Those who are selling in branch include branch consultants, tied-financial advisers, multi-tied financial advisers and independent financial advisers,” said Van Niekerk. Yet the RGA 2011 ‘Mystery Shopper’ Bancassurance Survey highlighted numerous shortcomings in this distribution channel. Consumers were not being sold to in-branch, but rather passed onto external IFAs. It was an almighty effort to get to the branch consultant and, even if this connection was made, it was not guaranteed that the branch consultant understood the product. “How many leads are banks losing – and how much more could they sell – if their processes connected potential clients with consultants more efficiently,” he asked. “When we did the 2011 survey our mystery shoppers were far more persistent than an average client – a lot of leads would have gone missing had they not been this persistent”.
Participants in the RGA 2012 South Africa Bancassurance Survey singled out outbound telephone call centres, branch consultants, agents in branches and internet sales as favoured areas for investment through 2013. They acknowledged that to be successful in converting leads to sales they would have to get executive buy in, make the sales process easier, integrate product at point of sale and obtain buy in at branch level….
Future trends to look out for
There is a new focus on e-underwriting, especially as a method to link solutions to sales portals. “E-underwriting is born out of making fully underwritten business much easier, and it is coming through as a process tool to speed up internet-based business,” said Van Niekerk. The environmental issues that bancassurers are most concerned with include the on-going economic downturn coupled with the impact of the NCA… But insurers feel that new product, new distribution lines and a greater focus by banks on non-interest income will help them to survive the difficult conditions going forward. There is also a sense that the tough economic conditions have resulted in insurers having a greater “say” at banks than before.
The bulk of bancassurers conduct their business in southern Africa and 64% had plans to expand into the continent, particularly in West Africa. Popular products for expansion into the continent include Credit Life, Funeral and Accident, “Not everyone is rushing into Africa,” concluded Van Niekerk. “It seems insurers are thinking a bit harder about their geographic expansion strategies”.
Editor’s thoughts: Five of the 11 respondents in the latest RGA 2012 SA Bancassurance Survey indicated “banks owned insurer” as their bancassurance model. Regardless of the model employed it seems that financial advisers, whether tied or independent, still feature in bancassurers’ distribution plans. We would like to hear from independent or multi-tied agents who deal with bancassurers. Do you market bancassurance products and if so, what has your experience been? Please add your comment or send it to [email protected]
